Does anybody understand how to work with the price elasticity?
Does anybody understand how to work with the price elasticity?
Price elasticities being negative means that an increase in price will lead to a decrease in volume and vice versa. Ex. a 1% increase in price leads to a 1% decrease in demand (elasticity of -1)
This is what happens with different elasticity values:
Elasticities in the case are of -0.5 and -2:
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Hi there,
I highly recommend you do a bit of googling here as it's a bit of a tricky concept to grasp.
Essentially, price elasticity is saying “If I charge $1 more, how many fewer people will buy” (And vice-versa).
I like this exhibit from socratic:
Hello!
To add on top of the great answers by the previous coaches, elasticity is a quite niche concept to find in consulting interviews. Apart from SK interviews, given their focus in Pricing, I am sure you won´t use it in 99% of the cases.
Cheers,
Clara
Hi there,
the theory is well explained below by Ian and Pedro, if you would like to understand how elasticity works it in practice, feel free to reach out, I am BCG expert in Pricing competence center.
Lucie
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