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This unit's readings included information on pricing. You are introduced to the shutdown price, using elasticity to determine the effects of price changes, and cost-based pricing. Discuss the importance of considering elasticity in pricing decisions and the danger of relying solely on costs.


REPLY TO MY CLASSMATE’S RESPONSE TO THE ABOVE QUESTIONS AND EXPLAIN WHY YOU AGREE? (A MINIMUM OF 125 WORDS)


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The price elasticity of demand and the supply are both key terms to be considered while designing the pricing strategy. Since quantity demand usually decreases with price, the price elasticity amount is almost always negative. Price elasticity of demand is an economic measurement of how quantity demanded of a good will be affected by changes in its price. (Guo, 2020). While price and demand are on two ends of the spectrum, the demand curve is typically based on the product but varies depending on its convenience.


For instance, your merchandise is trendy and has big name rivals, raising prices will likely drive customers away. The goal is to create impressive features that appeal to your target audience that are essential to the product. Although a decrease in quantity demanded does not necessarily mean that revenue decreases. The slight decrease in purchases, can be made up with the profit margin. Making your product as inelastic as possible will help increasing demand, regardless of how expensive you make the product, the goal to make consumers fall in love with your product and cannot live without it.


                                                     Reference:


Guo, V. (2020, July 15). Price Elasticity of Demand: Definition + How to Calculate. Retrieved August 07, 2020, from https://www.priceintelligently.com/blog/bid/154374/price-elasticity-101-the-necessities-and-your-pricing-strategy

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