Lesson 2.3.1

2.3.1 Price Quiz: NCFE Business & Enterprise, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

In partnership with Revision Ninja

Price is one of the four Ps. This lesson covers how selling price relates to cost and mark-up, how demand and supply settle at an equilibrium price, and the main pricing strategies: cost-plus, skimming, penetration, competitive, dynamic, loss leaders and promotional pricing, with the risk each one carries.

Key points

  • Selling price is what the customer pays; adding a mark-up to the unit cost is what turns a sale into profit.
  • The law of supply says that as price rises, producers are willing to supply a larger quantity.
  • At equilibrium the quantity demanded equals the quantity supplied, so there is neither shortage nor surplus.
  • A surplus appears when more is supplied than customers will buy, and is usually cleared by cutting the price.
  • Price skimming sets a high launch price to recoup development costs from keen early buyers, then lowers it.
  • Penetration pricing starts low to build sales and market share quickly, with the price lifted later.
  • Cost-plus ignores what customers will pay, dynamic pricing can seem unfair, and constant sales teach shoppers to wait.

Key terms

Mark-up
An amount added to the cost of making an item to set its selling price and secure profit.
Equilibrium price
The price at which the quantity demanded equals the quantity supplied.
Price skimming
Charging a high price at launch to earn extra from early buyers, then reducing it.
Penetration pricing
Setting a low initial price to win customers and market share quickly.
Cost-plus pricing
Working out price by adding a fixed percentage to the cost of each unit.
Dynamic pricing
Changing prices automatically as demand rises and falls.
Loss leader
An item sold below cost to bring shoppers in so they buy other goods at normal margins.

Host it live on the board and students join with a game code on their own devices, or revise alone with Free Play. The answers are revealed in the game.

Host this setFree Play

The 20 questions

  1. A baker spends £1 on ingredients for a loaf and charges shoppers £3. Which figure is the selling price?

    • £2.00
    • £4.00
    • £1.00
    • £3.00

  2. Why do firms add a mark-up to their costs?

    • To pay employee wages
    • To reduce tax bills
    • To lower overheads
    • To generate profit

  3. What occurs at the market price equilibrium point?

    • Supply exceeds demand
    • Demand exceeds supply
    • Prices are highest
    • Demand equals supply

  4. What does the law of supply state?

    • Quantity supplied rises
    • Prices remain constant
    • Quantity supplied falls
    • Demand always rises

  5. What causes a market surplus of unsold stock?

    • Excess demand
    • High inflation
    • Excess supply
    • Low production

  6. A new games console launches at £600, then drops to £400 a year later. Which strategy is this?

    • Price skimming
    • Cost-plus pricing
    • Penetration pricing
    • Competitive pricing

  7. What is a major drawback of dynamic pricing?

    • Reduced production costs
    • Lower total revenue
    • Zero sales volume
    • Customer resentment

  8. A furniture maker finds a chair costs £40 to make, adds 30% and sells it for £52. Which strategy is this?

    • Price skimming
    • Penetration pricing
    • Cost-plus pricing
    • Dynamic pricing

  9. What is the main goal of penetration pricing?

    • Fast market share
    • Clearing old stock
    • Reducing variable costs
    • Maximum profit margin

  10. Two rival supermarkets keep cutting prices to undercut each other. Which strategy has caused this price war?

    • Price skimming
    • Cost-plus pricing
    • Competitive pricing
    • Penetration pricing

  11. What must a selling price normally cover?

    • Fixed costs only
    • Only raw materials
    • Losses from rivals
    • Costs plus profit

  12. According to the law of supply, what happens when price rises?

    • Stock levels vanish
    • Supply increases
    • Supply decreases
    • Demand increases

  13. What is meant by the equilibrium price?

    • Zero profit price
    • Maximum possible price
    • Lowest cost price
    • Demand matches supply

  14. Why might a rail company use dynamic pricing?

    • Lower ticket sales
    • Cheaper off-peak costs
    • Reduced train capacity
    • Higher peak revenue

  15. What is a key drawback of cost-plus pricing?

    • Lowers fixed costs
    • Calculations are hard
    • Ignores market demand
    • Always creates losses

  16. Why do tech firms use price skimming on new gadgets?

    • Eliminate all rivals
    • Slow down sales
    • Recover development costs
    • Attract budget buyers

  17. What is the primary aim of penetration pricing?

    • Immediate high profit
    • Rapid customer acquisition
    • Reducing fixed costs
    • Clearing excess stock

  18. How do supermarkets profit from selling bread below cost?

    • Higher delivery fees
    • Selling other items
    • Supplier refunds
    • Government subsidies

  19. Why might a petrol station match a rival's price?

    • Prevent losing sales
    • Lower fuel quality
    • Avoid paying tax
    • Increase profit margin

  20. Why can frequent promotional sales damage business profits?

    • Delayed customer purchases
    • Higher staff wages
    • Increased production costs
    • Reduced store footfall

All NCFE Business & Enterprise quizzes