Posted: January 23rd, 2016

Identify one practical experience you have had in which the seller’s pricing and output strategy would benefit from knowing the price elasticity of demand.

Identify one practical experience you have had in which the seller’s pricing and output strategy would benefit from knowing the price elasticity of demand. It can be a business you have worked in or a business you have interacted with as a customer. Include a description of the experience, whether you believe demand is price elastic or inelastic, and what implications the price elasticity has for the business’ pricing and output strategy.

Note: Recall that elasticity measures the degree of response to price changes. It will be true at every elasticity that consumers will purchase a smaller quantity at high prices. However, with high price elasticity (that is, when demand is price elastic), the purchase quantity will go down by a larger percentthan the percent increase in price. In other words, consumers respond a lot to price changes when demand is price elastic.