Certified Professional Public Buyer (CPPB) Practice Test

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What defines market-based pricing?

Pricing set by fixed costs and profit margins
Pricing determined by current demand and competition
Pricing based on historical data of sales
Pricing negotiated between suppliers and buyers

The correct answer is: Pricing determined by current demand and competition

Market-based pricing is defined as pricing determined by current demand and competition. This pricing strategy takes into account the prevailing market conditions, including how much consumers are willing to pay for a product or service at any given time, as well as the pricing strategies of competing businesses. In a market-based pricing approach, businesses must continuously monitor the market to adjust their prices in response to changes in consumer demand and competitive actions. This adaptability allows companies to optimize their pricing strategies to maximize sales and profitability, while also remaining competitive in their industry. The other choices reflect different pricing strategies. Fixed cost plus profit margin approaches focus on internal costs rather than market dynamics. Historical data of sales can provide insights but does not necessarily account for current market conditions and demand fluctuations. Pricing negotiated between suppliers and buyers may lead to favorable terms, but it is more of a negotiation tactic than a true reflection of market-based pricing principles.