STUDENT WORKSHEET 10: BUSINESS AND THE PRICING POLICY

I. Read the following text and try to understand it as much as you can.

BUSINESS AND THE PRICING POLICY

When people run a business, they may be involved in the production, distribution or exchange of a product. Among
others, profit is one of the primary goals of conducting a business. Charity organizations, being non-profit, do not put profit
as the priority of the goals, however.

Profit is made when the production cost is lower than the selling price of the product. Production costs include
many elements, such as the cost of raw materials, labour and promotion. Theoretically, profit can be increased if production
costs are lowered. Lowering the cost of raw materials is not always possible because they are often beyond the business
internal control. Raw materials are often provided by supplier companies which also attempt to make profits. In many
developing countries, the labour cost is often pushed down to the minimal, which can result in labour disputes, unrest or
even strike. Many countries have been accused of allowing sweat-shop industries, where workers are paid so little. The
motive of this policy is often to maintain the competitiveness of the product. In some countries, products of sweat-shop
industries have been boycotted since low pay is considered as human exploitation.

To maximize the profit, therefore, a business might increase the selling price of its product. This policy works well
if the product is highly demanded by consumers and a similar product is not produced by any competing firm. It also works
well if the product has captive buyers, those who cannot avoid the purchase. Certain services like transportation in remote
places or basic services provided by the government often exploit their captive buyers. Similarly, people still buy fuel no
matter how expensive it is because it is needed for their daily transportation. The use of fuel can be economized, but it
cannot be completely stopped. Indonesians, for example, still buy rice though the price has been 50 percent increased
because they can do without it.

In free-market economy buyers have more freedom to exercise their choice in buying goods. To survive
economically, a product should be competitive. A business, therefore, often lower the selling price of its product below the
average price of similar goods. Pricing below the market, as it is called, is often practiced by new market players. This
strategy is needed to win a market share in the economy. However, most companies price with the market in order to
maintain the profit margin without losing potential buyers. An established company with a strong market share is more
confident in charging a price higher the average. Pricing above the market allows a larger profit margin and the sale is still
successful if the product has a good image among the public. People still buy expensive and luxurious cars because they are
reliable and prestigious. For products of average quality, pricing above the market is an economic suicide.

Most companies try to get a reasonable amount of profit for their products. Therefore, they should lower the
production cost and maintain the right selling price. Choosing the appropriate pricing policy: below, with, or above the
market, is absolute for the sustainability of their business.

II. 1. charity 11. push down 21. remote

2.non-profit 12. result in 22. fuel
3.goal 13. dispute 23. no matter
4.include 14. unrest 24. economize
5.theoretically 15. strike 25. do without
6.lower 16. accuse 26. exercise
7.beyond 17. sweat-shop industry 27. market share
8.internal 18. exploitation 28. confident
9.control 19. competing 29. public
10.attempt 20. captive buyers 30. suicide
III. Text Analysis: 1. Based on the title, what is the above text about?
Answer:_______________________________________________________________
2. Why are charity organizations mentioned in the first paragraph?
Answer:_______________________________________________________________
3. Why are Indonesians mentioned in the third paragraph?
Answer: ______________________________________________________________
 WORKSHEET 10

Name: _________________________________ Student Number: _____________________________

IV. Definitions: Define the following terms based on the text.
1. Sweat-shop industries
English : _____________________________________________________________
2. Captive buyers
English: ______________________________________________________________
3. Pricing below the market
English: ______________________________________________________________

V. Translation: Translate the following sentences into Indonesian.

1. Charity organizations, being non-profit, do not put profit as the priority of the goals.
Answer:_______________________________________________________________
2. Theoretically, profit can be increased if production costs are lowered.
Answer: ______________________________________________________________
3. The motive of this policy is often to maintain the competitiveness of the product.
Answer: ______________________________________________________________
4. To maximize the profit, a business might increase the selling price of its product.
Answer: ______________________________________________________________
5. It also works well if the product has captive buyers
Answer: ______________________________________________ ________________
6. Similarly, people still buy fuel no matter how expensive it is.
Answer: ______________________________________________________________
7. To survive economically, a product should be competitive.
Answer: ______________________________________________________________
8. This strategy is needed to win a market share in the economy.
Answer: ______________________________________________________________
9. For products of average quality, pricing above the market is an economic suicide.
Answer: ______________________________________________________________

VI. Comprehension and Writing Practice: Answer the following questions in English.
1. Why are charity organization labeled as non-profit organizations?
Answer:_____________________________________________________________
2. How can a company make profit from its business?
Answer: _____________________________________________________________
3. Why can’t production costs be easily lowered?
Answer: _____________________________________________________________
4. Why are products of sweat-shop industries often boycotted?
Answer: _____________________________________________________________
5. Which people cannot avoid buying a certain product?
Answer: _____________________________________________________________
6. Why do people still buy luxurious cars though they are expensive?
Answer: _____________________________________________________________
7. Which companies tend to price above the market?
Answer: _____________________________________________________________
1. When is pricing above the market an economic suicide?
Answer: _____________________________________________________________

VII. Comprehension Multiple-Choice Test: Choose the most correct answer based on the text.
1. ( ) Profit is one of the primary goals of conducting a ...A.company B.business C.charity organization D.product
2. ( ) Production costs include the cost of ..., labour and promotion.
A. profit B. business C. raw materials D. workers’ salaries
3. ( ) ... can be increased if production costs are lowered. A. Costs B. Business C. Selling price D. Profit
4. ( ) What are often supplied by other companies? A.Workers B. Production costs C. Raw materials D.Products
5. ( ) What can cause labour dispute? A. Labour unrest B. Labour strike C. Low pay D. Raw materials
6. ( ) An example of human exploitation is _A. Labour unrest B.Labour strike C. Low pay D.Competitiveness
7. ( ) Indonesian people cannot do without ..... A. cars B. rice C. labour strike D. price increase
8. ( ) In a free-market economy people have more .. A. cars B. rice C. freedom D. buyers
9. ( ) Lower prices are often adopted by ...A. developing countries B. new producers C. car factories D. farmers
10. ( ) A good pricing policy is required so that a business can ...
A. produce goods B. survive C. decrease production costs D. get a good image