As the research starts to come in about your expansion opportunities abroad, the marketing department has discovered that the price elasticity for CPI's products in Brazil is expected to be much greater than in current markets served. Separately, your CFO sent you an e-mail earlier in the week stating that, depending on how much business CPI does abroad, the firm would expose 5 to 20 percent of revenue to currency fluctuations (the Real and Euro are the currencies for Brazil and Germany respectively).
Both of these issues are of concern to you, so you decide to have a meeting with the VP of Marketing and the CFO. Explain the differences among inelastic, elastic, and unitary price elasticity to the VP and CFO. Then, what questions would you ask? What recommendations would you have for the CFO?
This paper deals with price elasticity. The following section will help the reader to understand the difference between different types of price elasticity. This section also discusses the questions asked to the VP and CFO of CPI in the meeting, and what steps would help them to increase the revenues and profits of the company.
Other things remaining the same, the percentage change in quantity due to the percentage change in price is known as price elasticity. Price elasticity is divided into three groups, i.e. unitary elasticity, inelasticity and elastic price. Unitary price elasticity occurs when there is an equal percentage change in the quantity and the percentage change in price, i.e. percentage change in quantity/percentage change in price that is equal to 1. On the other hand, an elastic price refers to the situation when a small increase in price results in a large or greater change in the quantity demanded or supplied. Price inelasticity refers to the ...
The response addresses the queries posted in 646 words with references.