Elasticity Of Demand In Pricing Strategies: Case Studies Across Various Industries

Kanav Bhargava, Symbiosis Law School, Hyderabad

ABSTRACT

Elasticity of demand is the most important tool used in economics to demonstrate how quantity demanded changes when income, price and other such factors are varied. This in turn helps firms to understand consumer needs and come up with appropriate pricing strategies. In addition, it also highlights the responsiveness of demand due to change in prices for a product or service. Elasticity prediction of market trends determines pricing levels that maximize revenues. It varies from one market setting to another but mainly as a result of competition, availability of substitutes or their lack thereof and customer incomes among others. It is essential therefore to have separate pricing methods directed at unique segments such as market- penetration strategy, skimming strategy and psychological pricing among others based on the characteristics each segment or particular group of buyers possess. For example, this study will delve into various instances drawn from retailing industries namely automobile companies’ technology firms like Apple Inc., services industry such as hotel business and car manufacturing sector showing how prices have changed due to changing elasticities. In essence elasticity should be considered when coming up with optimal prices or choosing whether revenue management tools should be adopted (Braeutigam & Daughety 2013). Thus businesses can leverage on their knowledge about elasticity in order to maintain competitiveness while increasing revenues even amid highly unpredictable environments.

Keywords: Elasticity, Demand, Strategies, Segments, Industries, Market, Pricing