Business Management (BM) Practice Test 2026 - Free 7 P's of Business Practice Questions and Study Guide

Loss leader pricing uses intentionally low prices, even below production costs, to draw customers in. The idea is to attract shoppers with a very cheap item and then encourage them to buy other products that carry higher profit margins. That combination—selling one item at a loss to boost sales of profitable items—defines this approach.

Dynamic pricing adjusts prices based on demand and supply and isn’t about undercutting costs to lure customers toward high-margin items. Mark-up means setting prices by adding a profit margin to cost, which typically stays above cost rather than below. Penetration pricing sets a low price to gain market share, but its goal is widespread market entry rather than using one loss-leading item to push other higher-margin sales.