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If
the Volume is changing faster than the price
increase, that is High Price Elasticity ( High
Price Sensitivity ). This happens with products
such as luxury items, traveling, etc. Since
consumer can live without these products or
services, they decrease purchasing in a rate that
is grater than rate of price increase.
If
the Volume is changing slower than the price
increase, that is Low Price Elasticity ( Low Price
Sensitivity ). This is typical for core products,
necessities like fuel, electricity, food, etc. In
some specific cases the Volume even does not
change at all. This happen with the most basic
products like is the bread, or addictions as for
example are cigarettes.
GRAPH:
PRICE ELASTICITY ( No, Low and High Elasticity )
Also,
Price Elasticity for the same product can be
different from one situation to another. Example;
the consumer is shopping in the supermarket and is
very carefully picking his 2 liters beverage,
since the price of the same flavor but in
different Brands is € 0.10. The next moment,
after the shopping is finished and the consumers
sits in the caffe and order the same beverage that
costs more than 2 liter bottle, while he get only
0,25l bottle.
Obviously
the price sensitivity changes from product to
product, from consumer to consumer, but also from
one moment to another. The Price Elasticity
influence should be kept
in mind when the price increase is being planned.
Watch
PRICE
ELASTICITY OF DEMAND Video.
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