Applications of cross price elasticity values
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Original question: Can we use the concept of price elasticity to identify a brand's competitors? How would that work?
Your response: Yes, you can use the price elasticity concept to identify a brand's competitor. For example if you are a coffee drinker who likes to use a flavored cream as a complement. Let's say your favorite coffee creamer is International Delight's Hazelnut's liquid flavor, which charges a premium price. If for some reason you have found a product that yields the same satisfaction at a lower price, you can purchase generic substitute creamer with the same flavor, say in powder this time, at a cheaper price, and could last longer than your liquid brand creamer. So the percentage change in the quantity demanded of your brand coffee creamer will change as a result of a percentage in price of another close substitute.
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Solution Summary
The solution discusses how can the elasticity concept be useful in identifying a brand's competitor.
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Can we use the concept of price elasticity to identify a brand's competitors? How would that work?
Yes, we can use the concept of price elasticity of demand to identify a brand's competitors.
Cross price elasticity helps us to study the affect of price changes on the quantity demanded of a product in consideration. If cross price elasticity of a product with ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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