Chapter 13, Problem 1AMK

Summary Introduction

To discuss: The manner in which price equation applies to the purchase price of gasoline, an airline ticket, and a checking account.

Introduction:

Price equation:

Price of products and services has a direct impact on company profit, which is calculated as $\text{Purchase price}=\left(\text{Final price}-\left(\text{Allowances and discounts}+\text{additional fees}\right)\right).$

A purchase price is the money an individual pays for goods and services. It is the basis for an individual to know the profit or loss from the product sold.

Explanation of Solution

Price equation to calculate purchase price:

$\text{Purchase price}=\left(\text{Final price}-\left(\text{Allowances and discounts}+\text{additional fees}\right)\right)$

Price equation for the purchase price of gasoline:

$\text{Price equation(Gasoline)}=\text{Pump price}-\text{Cash discount}$

Price equation for the purchase price of airline ticket:

$\text{Price equation(Airline ticket)}=\left(\begin{array}{l}\text{Coach fare}-\text{Seasonal offers \& off-peak discount}\\ +\text{Premium \& peak time flight}\end{array}\right)$

Price equation for the purchase price of checking account:

$\text{Price equation(Cheaking account)}=\left(\begin{array}{l}\text{Service charge}-\text{Discount for checking balance}\\ +\text{Pre check charges}\end{array}\right)$