REAL WORLD TAKEAWAYS

• While some products use fixed pricing (e.g. a t-shirt costs $15), others use unit pricing (e.g. tomatoes cost $4 per pound). Sometimes, it’s obvious which pricing system is appropriate; sometimes either might work, and the one we use is largely due to convention. We do it because it's the way we've always done it...but we could do it differently.
• When buying products with fixed pricing that come in different sizes, people buying smaller sizes will get less material for the same price as someone buying a bigger size. However, there are many other drivers of cost for the company selling the product.
• Pricing structures can affect human behavior, e.g. people might try to fit into smaller shoes if they were cheaper.

MATH OBJECTIVES

• Calculate unit rate ($/oz) for various sized shoes and discuss how the cost per ounces changes as size changes
• For a given cost per ounce, calculate how much different size shoes would cost if Nike charged by weight
• Discuss advantages and disadvantages of alternative pricing schemes