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# Pricing the influence of demand

Published on: Mar 4, 2016
Published in: Education

#### Transcripts - Pricing the influence of demand

• 1. Pricing the influence of Demand Chapter 25
• 2. Price and Demand • Business Supply Products • Consumers Demand Products • The interaction of supply and demand can determine the price of a product.
• 3. Demand Schedule 100 Price and demand are inverse as price goes up quantity demanded goes down, as price goes down quantity demanded goes up p1 Price 50 p2 demand q1 0 q2 50 Quantity Demanded 100
• 4. Prestige Demand Schedule Prestige products are products perceive an association between high price and higher quality. 100 p3 p2 Price 50 p1 demand 0 q1 q3 q2 50 Quantity Demanded 100
• 5. Increase and decrease in Demand Curve 100 Besides price, other factors can cause a shift in the demand curve p1 Price 50 p2 demand q1 0 q2 50 Quantity Demanded 100
• 6. Factors influencing shift in demand • • • • • • • Consumers experience change in income Price of rivals goods may change Price of complementary product many fall. Changes in taste and fashion Marketing campaigns Changes in population Government legislation & regulation
• 7. How businesses use demand curves • Useful tool to help business: o Calculate revenue to be earned for any given price change o Predict the likely reaction of consumers to price change o Predict the likely impact upon revenue of price change
• 8. Calculating Revenue • Price X quantity demanded = total revenue Price Quantity demanded Total revenue 10 6000 60,000 20 5000 100,000 30 4000 120,000 40 3000 120,000 50 2000 100,000
• 9. Price Elasticity of demand • Want to know what will happen to demand for their product if their price changes Price Percentage change in quantity demanded Elasticity of Percentage change in price Demand OR Change in quantity demanded Divided Original quantity demanded by Change in price Original price
• 10. • ELASTICITY—sensitivity of the demand for a product to price change Elastic demand--% change in Q > % change in P Inelastic demand--% change Q<% change in P
• 11. Factors affecting price elasticity • Number of substitutes for a product o More substitutes = highly sensitive to price changes o Relatively price elastic • Time – the longer the period of time the more price elastic the demand for a product is likely to be.