Price Sensitivity/Elasticity

Question 1

Price Elasticity/Sensitivity

Answer 1

How sensitive to the price are consumers?

How much would raising or lowering the price impact the amount of demand I may receive?

Question 2

Elasticity

Answer 2

Changes in demand as a result of change in price

• “If I don’t NEED it, I’ll cut it out of my life”
• the number of competing products and available substitutes affects the elasticity of demand

Question 3

Price Elasticity: Milk vs. Chips

Answer 3

The price elasticity for chips is more sensitive because it is not a necessity and has many alternatives

The price elasticity for milk is inelastic because it is a necessity to most and have few alternatives