- A.The percentage change in quantity demanded for a 1% change in price — elastic categories lose volume on price increases; inelastic categories don't.
- B.Setting price based on the customer's perceived value rather than cost — captures the maximum the customer is willing to pay. ✓
- C.Selling multiple products together at a price below the sum of individual prices — captures revenue from customers who would not buy each item alone.
- D.Setting price based on the customer's perceived value rather than cost — captures the maximum the customer is willing to pay.
Value-Based Pricing is setting price based on the customer's perceived value rather than cost — captures the maximum the customer is willing to pay. The other options describe related but distinct concepts in Pricing — see the deep-dive guide for the full distinction.
How to think about questions like this
Maximizes profit when customer value differentiation exists. Questions like this test whether you can distinguish Value-Based Pricing from neighboring concepts. The most common trap is choosing a closely-related concept that sounds similar but applies in a different context.
When you see a definition question on an exam, do two things: (1) translate the question into your own words, then (2) generate the answer in your own words before reading the options. This avoids the cognitive bias of recognizing a familiar phrase as correct just because it is familiar.