Week 3 Internet Assigment Price Elasticity

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1 Price Elasticity Jasmina Sprayberry Colorado Christian University MKT-460A- Product, Development and Pricing James Douglas August 9 th , 2020

2 Price Elasticity Determining the price of a products can be a difficult task. There different factors that need to be considers and that play a role in pricing a product. It has a very large impact on the company’s bottom line. “Some products have a much more immediate and dramatic response to price changes, usually because they’re considered nice-to-have or non-essential, or because there are many substitutes available,” ( Gallow, 2015). The first thing that is considered when pricing a product is understanding price elasticity. Price elasticity is a measurement of a relationship between a change in quantity demanded or a particular good and a change it its price. (McCormick, 2015). To determine price elasticity there a factor that go into it such as price levels, the type of product or service, income levels, and substitutes. Products that are often high- priced are considered highly elastics, due to the fact that if prices fall consumers will more than likely purchase the product at the lower cost. When it comes to different segments of good let’s talk about pizza, gasoline and luxury cars. Pizza is a great example of a relatively high elastic, where a small price change can drive the consumers to switch gear to something else because there are plenty of options. Gasoline is the type of product that doesn’t have very many options for substitutes, so therefor it is considered to a have a low price elasticity. Luxury cars have a high elastitcy of demand because they tend to be sensitive in price change. The most elastic product is pizza due to the fact there are many different substitutes, gasoline is inelastic meaning that the change in price doesn’t have much influence on demand. Luxury care are also in the category of relatively elastic. Some of the key takeaways are that higher priced items tend to be highly elastic such as pizza, if prices fall consumers will more than likely buy at a lower price. Luxury items are definitely more elastic. As (Gallow, 2015) states that it is very important to keep in mind that

3 that understanding the price elasticity of demand for your product doesn’t tell you how to manage it. Staying relevant and differentiated from your competitors is a way to learn how to adjust the price up and down, to really better represent the level of value that one you are providing to your customers. Supply and demand has always been thought to us, a great biblical example is “He who supplies seed to the sower and bread for food will supply and multiply your seed for sowing and increase the harvest of your righteousness” (Corinthians 9:10, NIV)

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4 References Gallow, Amy. (2015, August). A Refresher on Price Elasticity. Harvard Business Review. Retrieved from https://hbr.org/2015/08/a-refresher-on-price-elasticity MCCormiock, M. (august, 2015). Black curve. What is Price Elasticity? Retrieved from https://blog.blackcurve.com/what-is-price-elasticity Kenton. W. (April, 2020). Investopedia. Price Elasticity of Demand. Retrieved from https://www.investopedia.com/terms/p/priceelasticity.asp

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