Price & Demand
- Tags
- finance
Price is determined by the market and can be plotted as a [see page 4, demand] curve.
Demand is dependant on price, low-price -> high-demand.
Elasticity
A product with an [see page 6, elastic] demand shows a more than proportional change in demand due to a small change in price. Products that can be swapped for a similar product have elastic demand (buyers can quickly switch to it when a discount is presented).
A product which shows a less than proportionate change in demand are [see page 8, inelastic]. Even a slight price reduction isn't sufficient to cause an increase in demand (think luxury car).
A customer is said to be price-sensitive if a reduction in price isn't enough to attract these customers.
Market Price Acceptance
Products firms can be defined as either:
| Price Model | Meaning |
|---|---|
| Price Taker | Accepts and delivers products at Market Price. |
| Price Setter | Can set the market price themselves. |
A product [see page 16, can] be a price setter if:
- It has few competitors or a monopoly.
- Brand reputation.
- Offers luxury products.