Practice Test Geeks(CPP) Certified Pricing Professional Practice Test
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Dynamic Pricing & Revenue Management Flashcards

7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A retailer finds that lowering price from $50 to $45 increases unit sales from 1,000 to 1,200. What is the price elasticity of demand?

    Answer: -2.0

    PED = (%ΔQ / %ΔP) = (20%/-10%) = -2.0, indicating elastic demand.

  2. Which of the following is an example of 'surge pricing'?

    Answer: A ride-share app charging 2.5× the base fare during a major event

    Surge pricing multiplies the base fare by a factor when real-time demand significantly exceeds supply.

  3. In airline revenue management, a 'bid price' represents:

    Answer: The minimum revenue per seat required to justify selling an additional unit of inventory

    The bid price is the shadow price of a unit of constrained capacity — accepting a booking is justified only if the fare exceeds this threshold.

  4. A company observes that its dynamic pricing algorithm is charging different prices to demographically similar customers browsing on different device types. The primary concern this raises is:

    Answer: Potential price discrimination and fairness/legal risks

    Device-based price differences can appear discriminatory and may trigger regulatory scrutiny or consumer backlash, especially if correlated with protected characteristics.

  5. Which of the following best describes 'markdown optimization' in retail revenue management?

    Answer: Using data-driven models to determine the timing and depth of price reductions to clear seasonal inventory

    Markdown optimization balances inventory sell-through speed against margin retention, choosing when and by how much to reduce prices on seasonal goods.

  6. A company uses 'price banding' to set a range within which prices can dynamically fluctuate. The primary purpose of the band's floor is to:

    Answer: Protect minimum contribution margins and brand equity

    The floor prevents the algorithm from pricing below the minimum acceptable margin, protecting profitability even in aggressive demand-chasing scenarios.

  7. Revenue management systems classify demand into 'contracted' and 'spot' categories primarily to:

    Answer: Reserve appropriate inventory for committed obligations before opening spot capacity to dynamic pricing

    Separating contracted demand (guaranteed bookings) from spot demand ensures committed customers are served while remaining capacity is optimized dynamically.