Unit 3 - Marketing Flashcards
A2 - Marketing analysis and strategy
What is price elasticity ?
PED measures the responsiveness of the quantity demanded to a change in the price of a good
What is meant when price elasticity is more than 1 ?
The percentage change in price will lead to a larger change in demand. This is responsive to the change in price
What is meant when price elasticity is less than 1 ?
The percentage change in price will lead to a smaller change in demand. This is not responsive to the change in price
What is meant when price elasticity is equal to 1 ?
The percentage change in demand is equal to the percentage change in price so any change in price will lead to an equal change in demand.
What is an inelastic product ?
A product which have no alternative. Often these can be price capped by the government.
What is an elastic product ?
A product that dose have an alternative and are not a necessity, these are price sensitive.
What are the influences that affect PED ?
The availability of close substitutions to the good
If the good is seen as a necessity
The price of the product as a proportion of income
The level of consumer loyalty
What is income elasticity of demand ?
Measures the responsiveness of demand following a change in consumer incomes
What are the impacts that income of elasticity have on business decisions ?
In a period of economic growth the focus will be on luxury goods whereas in the an economic recession will be producing more basic versions of a product (an own brand)
What is promotional elasticity of demand ?
Measure of the responsiveness a demand of a product has following a change in the amount of money spent on promoting it.
What dose it mean if promotional elasticity is greater than 1 ?
Demand is elastic or responsive following a change in spending on promotion.
What dose it mean if promotional elasticity is less than 1 ?
Demand is inelastic there might be a little point in increasing promotional expenditure.
What is a weakness of the elasticity concept?
This will not always be reliable, this could have influenced sales when the promotional campaign in place. Changes in sales may have been due to other factors (such as externals).
A04 / Evaluation points about elasticity ?
Depends on elasticity which is useful for lots of different points when making marketing decisions for example dependent upon promotional elasticity.
Its not always easy to calculate and may need to be recalculated frequently.
How reliable are the results ?
