What is price elasticity?

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What is price elasticity?

Post by ChienWei_Lee on Mon Mar 29, 2010 9:05 am

“The market power school of thought ads are more persuasive than informative, leading consumers to perceive artificial differences between brands, which results in lower price elasticity.”
What does price elasticity mean?
Why did the statement say “…, which results in lower price elasticity.”?
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ChienWei_Lee

注冊日期 : 2010-02-25
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Re: What is price elasticity?

Post by camille_girard on Mon Mar 29, 2010 12:23 pm

it means that people are not infuencing by the price but by the advertisement.
In some products, more the price is low, more the demand will grow. In this case the price elasticity will be high because people will decide to purchase according to the price.
But in the case'example, the demand will be infuencing by the ads that consumers will get : so not sensitive to the price.
Is it correct ?
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camille_girard

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Re: What is price elasticity?

Post by MH_Huang on Mon Mar 29, 2010 12:26 pm

Yes, nice answer, Camille. When price elasticity is low, consumers stay with a brand even if its price is higher than competitors.

MH_Huang

注冊日期 : 2010-02-20

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Re: What is price elasticity?

Post by ChienWei_Lee on Mon Mar 29, 2010 2:14 pm

camille_girard wrote:it means that people are not infuencing by the price but by the advertisement.
In some products, more the price is low, more the demand will grow. In this case the price elasticity will be high because people will decide to purchase according to the price.
But in the case'example, the demand will be infuencing by the ads that consumers will get : so not sensitive to the price.
Is it correct ?

Yes, Camille gave the correct answer.
To be more explicit, in economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable.
There are many kinds of price elasticity.
Here, the price elasticity means PED(price elasticity of demand).
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ChienWei_Lee

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Re: What is price elasticity?

Post by Roy on Mon Mar 29, 2010 7:19 pm

Price elasticity formula can also be expressed like this :

η = - ΔQ/QΔP/P

For example: The product A's price elasticity

Assumed the Q(sales volume) is 200, P(price) is 100

When product A's price arises 10% (ΔP = 20),
the Q will drop by 30% (ΔQ = - 60)

η A = -( - 60/200/20/100 ) = 1.5

Roy

注冊日期 : 2010-03-10

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Re: What is price elasticity?

Post by Eva_Berends on Mon Mar 29, 2010 7:42 pm

Cool, an economic viewpoint. I think it is interesting, especially when it comes to complementary and substitutional products.
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Re: What is price elasticity?

Post by Roy on Mon Mar 29, 2010 8:10 pm

Thanks.

If it comes to Substitutional product, it might be

η = ΔQ(B)/Q(B)ΔP(A)/P(A)

If the outcome is positive, we can say product A & B are substitutions for each other.

If the outcome is negative, then they are complements.

But..........the issue seems to be economics, not marketing. haha

Roy

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Re: What is price elasticity?

Post by Eva_Berends on Mon Mar 29, 2010 9:47 pm

Haha yes it is, but it is still interesting though!
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Re: What is price elasticity?

Post by ChienWei_Lee on Mon Mar 29, 2010 9:55 pm

Roy wrote:Thanks.

If it comes to Substitutional product, it might be

η = ΔQ(B)/Q(B)ΔP(A)/P(A)

If the outcome is positive, we can say product A & B are substitutions for each other.

If the outcome is negative, then they are complements.

But..........the issue seems to be economics, not marketing. haha

Great extracurricular knowledge supplement!!
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ChienWei_Lee

注冊日期 : 2010-02-25
年齡 : 29
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