Price Elasticity

Paper Summary:

This paper details the cost information needed to analyze a proposal from hypothetical company X's marketing department to lower prices by ten percent on a product or service that has a price elasticity coefficient of 2.5, in an attempt to increase sales revenue and ultimately overall profit. In addition to exploring the overall benefits and detriments of pursuing this course of action, this paper also evaluates the effect of possible competitive responses by other companies who compete in the same arena.

From the Paper:

"While this result would be positive for the marketing department, as the increase in sales revenue would increase their bonus level, it would be detrimental to the general manager as his / her compensation is based upon meeting profit targets. Additionally, the company as a whole will not benefit from taking actions that reduces long-term profitability. The only way that the marketing department's suggestion could work in this scenario would be if the increased sales would lead to permanent market share gains that could be made more profitable down the road, when some of the company's cost expenditures can be reduced. If that were the case the company would also need to consider if they could afford the reduced profit margins long enough to see a long term increase in market share."

More papers on Price Elasticity:

• Term Paper # 125546 : "CPI's Price Elasticity"
• Term Paper # 125184 : "Price Elasticity"
• Essay # 69634 : "Price Elasticity of Demand: Xenical"
• Analytical Essay # 145834 : "Price Elasticity: Women's Apparel and Children's Toys"

APA Citation:

MLA Citation: