Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
Price-Elastic Products
When would you want to own a business that sells price-elastic products? Why?
The demand for price-elastic goods is extremely sensitive to increases in prices. An increase in price of a price-elastic product will result in a larger corresponding decrease in the demand of that product. Price-elastic products operate within competitive markets, as consumers have the flexibility of shifting their purchasing power towards other goods and services. An example of a price-inelastic product would be a product produced by a monopoly such as a utility (Price elastic products, 2008, Econ help). In general, price-elastic goods favor the interests of consumer, not suppliers.
There are many different types of markets for price-elastic goods: "For example, confectionary is quite elastic, there are many different types to choose from; but the market is still quite profitable" (Price-elastic products, 2008, Econ help). For chocolate, the overall demand is stable, but consumers have many choices, so for individual retailers the price seems elastic. In a recessionary market it might be advantageous to sell a cheaper version of price-elastic goods. Since the demand for chocolate is constant, but different types are price-elastic, selling a downscale version of the product might result in higher profits. Goods that can be produced in high volumes, and can make a profit by the producer earning a small profit off of a high output is one example of how price-elastic goods can be profitable during an economic downturn -- through economies of scale and pricing low. Finding a cheaper way to produce the good with new technology and pricing the product lower than competitors is another example of how to make price-elastic goods profitable. The price remains stable but the costs of production are lower, so the producer makes a larger profit.
Works Cited
Price elastic products -- are there any benefits? (2008, March 28). Economics Help. Retrieved May 14, 2009 at p://www.economicshelp.org/blog/business/price-elastic/
Likewise at the upper end the potential demand will equal zero at a given price point, thus there is no point at which a sale of one unit at near-infinite product exists. The equilibrium point will be different for each product, but will always be the point at which total dollar profit is maximized. A steep decline in price may mean a steep increase in sales, but the result may
Producing inexpensive restaurant meals for McDonald's has been highly profitable, given its ability to sell many burgers quickly and to create standardized franchises all over the world. Having the ability to produce in large volume also buffers a firm against the danger of a price-elastic good getting into a price war with other firms. In the case of Mattel and McDonald's, both firms are so large and have such
The exclusivity of these higher-end products and their cost structures also are deliberately now being created to ensure barriers to entry from mass merchandisers. The threat of a mass merchandiser dominating the supply chain and driving down costs to sell on brand equity alone continues to force marketers of key brands in this industry to concentrate on defensible differentiation. As a result of all these strategies and the inherent
Price Elasticity of Demand: Four Factors Strolling through the aisles at the local Boston Store led me to the Jeans department where I was overwhelmed with the selection: Guess, Ralph Lauren, Levi Strauss, Calvin Klein, and others. Which of these products would I purchase and how would the price elasticity of demand impact my decision? The definition of price elasticity is straightforward: "how much the quantity demanded changes when the price
Second, it's possible to use price elasticity as an indicator of a product or services' level of necessity or luxury, the proportion of income required to purchase the item, and the time period covered for the purchase all indicate highly elastic products. Inelastic products often have many substitutes, are more commodity-like, and are sold through bundling, convenience offers and drastic discounting. Price elasticity then can be used to define competitors not only by designating which products
The interest of certain categories of public in promoting this trend has significantly intensified. Therefore, the demanded quantity of organic products is likely to increase. 2. There are several factors that influence the organic products supply. The most important factors are represented by prices, costs of production, prices of traditional products, weather, and technology. In the case of the influence of prices, if they increase the supplied quantity of organic