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Price Elasticity for Wal-Mart's Decision

This was a post that you created earlier. I related it to Walmart. My followup question is:

What does this decision by Wal-mart tell you about the price elasticity of the demand curve that it faces?

There are many ways that organizations can use to increase revenue. One of the ways is to increase the price of an item. This idea of increasing the price of a product is very tempting to many decision makers. Customers, however, do not like to pay more for anything and therefore would be very unhappy if management decided to increase the price of their product.

Another way that an organization can increase revenue and profits is by reducing the cost associated with the production of the product. This is challenging, but it is achievable and it is probably one of the most effective ways to make profits because it keeps customers intact and happy.

The organization that I worked for lowered the price of the products not only to keep existing customers but also to attract new customers. This action was taken because the company implemented aggressive ways for cost reduction within the company. By actually reducing the cost of producing the product through continuous improvement efforts, the company increased profits and passed some of the success over to the customers through price reduction.

Solution Preview

The lower half of the demand curve is inelastic, which is the part where if you increase prices, your total revenue also increases. The upper half of the demand curve is elastic, which means if they lower ...

Solution Summary

The expert examines price elasticity for Wal-Mart's decisions.