A critical assumption when using target profit pricing is that
A) a higher average price will not cause the demand for a product to fall.
B) new technology will cause the demand for a product to rise.
C) a higher average price will deter moves by competitors.
D) this form of pricing is extremely risky because profit is tied to the current value of the dollar.
E) competitors will not copy any pricing changes.

Question

Quizplus · Accepted Answer

Target profit pricing assumes that a higher average price will not cause the demand for a product to fall, allowing the company to reach its desired profit target. This assumption is critical in order for the pricing strategy to be effective. If demand falls due to the higher price, the company may not be able to reach its profit target, and may even see a decrease in profits.

A Critical Assumption When Using Target Profit Pricing Is That