Arc elasticity

Each tier of customers have different price sensitivity and the cut-off points should, therefore, be distinctive. It is unknown how the system arrives at a decision but it should analyze price elasticity of demand by each customer segment to optimize the cut-off point. This is further complicated when we consider the types of hotel rooms as it alters customers sensitivity to price and…

- for price elasticity of demand is the proportional change in demand given a change in price( Patrick L et al. 1997) PED = ( % change in the quantity demand)/(% change in the price) = (%∆QD)/(%∆P) Or % ∆ QD mearused as follows for two different quantities (Quanity2-quantity1)/(quantity1+quantity2/2) Similarly the % ∆P = (price2-price1)/(price1+price 2/2) Therefore, midpoint method for calculating price elasticity of demand is the change in quantity…

2.3. ECONOMICS INVOLVED (a) (b) (c) FIGURE 2.6. (a) Demand Relationship (b) Supply Relationship (c) Demand and Supply Relationship Therefore, it can be said that price is the reflection of demand and supply. It is believed that behind the allocation of various resources underlies the relationship between these two (demand and supply). For example, if there is a shortage of oranges in the market, their price would increase. This reason behind this is the reduced supply and increased demand for…

Substitution effects: it is a situation whereby if there is an increase in price or decrease in income, consumers will substitute high-priced items with less expensive alternatives. Substitution effects shows the change in the consumption of goods due to the change in the prices of the products. Consumers tends to replace/substitute luxury goods with cheaper items when income decreases or price rises. However, the consumers also tend to substitute cheaper items with luxury goods when their…

The advanced pricing technique that would be most appropriate for a Sam’s Club or Costco would be second degree price discrimination. Second degree price discrimination is defined by Thomas and Maurice (2010, p. 583) as, “When a firm offers lower prices for larger quantities and lets buyers self-select the price they pay by choosing how much to buy.” Therefore, when the same consumer buys more than one unit of a good or service at a time the marginal value placed on consuming additional units…

When alcohol has a appropriate substitutes, minimum price could be an effective solution to reduce alcohol consumption. Substitutes are products which can replace the goods (Tribe,J 2011). When price of a good is increased, the demand of substitutes is increased. Minimum price policy makes the alcohol’s price higher, the demand of alcohol’s substitutes will be higher, whilst the demand of alcohol will going down. Concretely, professor David Nutt has developed a drug to substitute alcohol and…

In consumer countries such as China and India price elasticity of demand is high due to low per capita income and the emergence of low cost substitutes. Nokia seeks to gain competitive advantage by offering tailored products at cheaper prices as expensive and highly innovative models will not sell. Developed customer countries such as the UK & US have a lower price elasticity of demand paired with a high elasticity of substitution and expectation, therefore Nokia makes innovation…

When the world economy grows, so should the oil demand especially income growth in developing economies. The income elasticity of oil demand also displays the sensitivity of oil prices to changes in the business cycle, the more elastic the income elasticity of demand the greater volatility in prices in response to booms and recessions, this was seen in the dramatic weakening in the cartel in 1983 recession, then again in a significant…

the price elasticity of supply (PES) is inelastic. In the short run, producers will be unable to respond to changes in price, because they will need to take the time to breed new produce before releasing it into the market. The sow supply being reduced by 25%, impacts producers’ capability to supply pork in the future, as they have to spend several generations increasing their supply of sows whilst releasing 25% less produce into the market. In comparison to supply, the price elasticity of…

3. What are the determinants of price elasticity of demand? [10] For some products buyers are price sensitive (products are elastic), and for some products buyers are not price sensitive (products are inelastic). People are very sensitive to one products price change if the product has a similar product in the market. But sometimes when the price of a motor bike increases by 15%, the consumers are affected by it, but on the other hand when price of salt increases by 20% people aren’t…