Demand Estimation : Price Elasticity Of Demand Essay
2. Implications of each computed elasticity for the business in terms of short-term and long-term pricing strategies.
- Price elasticity of demand (ED)
The price elasticity of demand (ED) is “ the percent change in quantity demanded per time period that occurs as a result of some percentage change in price” (McGuigan, et. al, 2014). It is used to see how sensitive the demand for a good is to a price change. Demand tends to be more elastic in the long rung rather than in the short run, because when prices change consumers often need more time to respond and change their shopping habits. However, in the short run, the demand for goods may be inelastic as it is the case with our company, which (ED) is -1.19, because it may take time to our consumers to both notice and then respond to…