Dynamic Pricing adjusts prices based on the option value of future sales, which varies with time and units available.
Generally we see a scenario where price starts increasing with a reduction in supply units available with the supplier. As the price varies with the number of units available with the seller, the contribution and the break–even sales price (BEP) also vary.
In cases, where the dynamic price net of variable costs (for sake of brevity, referred as the dynamic contribution), is less than the per unit fixed price, it creates a burden on the seller, if it intends to achieve break–even, to increase the subsequent sale price (and hence the contribution) to sufficiently compensate for the loss suffered in the previous sale(s). In this scenario, we can conclude that the BEP will gradually increase. The profitability of the seller depends on its ability to sell units at a cost above the BEP.
CA Nirmal Ghorawat's Blog 