Price Elasticity Analysis

Analysis of Price Elasticity, formally referred to as price elasticity of demand, calculates and analyzes, based on historical and survey based data, the effect of price on product/service demand and consumption. Price elasticity of supply can also be determined and calculated.  The mathematical formula for the price elasticity of demand calculation is:

ED = Percentage Change in Quantity   Demanded/Percentage Change in Price

Supply and demand principles mandate that a rise in price results in decline in demand, therefore price elasticity is always a negative number, although often expressed as the absolute value (without the negative sign). When properly constructed, Price Elasticity studies yield quantitative responses to price changes within the target population and at a level of accuracy based on sufficient sample size.

Demand Elasticity
is represented by a greater change in percentage of products or services purchased vs. change in price (or E<1 from the above formula), where inelasticity is defined as minimal percentage change in demand or quantity purchased when price changes.  Supply Elasticity is represented by greater change in quantity than percentage change in price, where inelasticity is defined as percentage change in quantity that is less than the percentage change in price. Elasticity (price sensitivity) is represented graphically by increasing horizontal orientation on a Price/Quantity graphic, while inelasticity (price insensitivity) is reflected by increasing vertical orientation of the curve.

As the availability of competitor products or services increases, so does price elasticity of supply and demand.  
Greater uniqueness results in less elasticity, where commoditization (greater availability of substitute products or services) yields increasing elasticity.  Items that represent a greater proportion of the buyer's budget, and those that are purchased or consumed over a longer timeframe are subject to greater elasticity.  

Pricing strategies are formulated based upon the marketplace view of what is perceived by the buyers as expensive and inexpensive in moderation and at the extremes, within the parameters mentioned above.
Specific price points and ranges emerge based on study design and data collected, providing our clients with immediately applicable optimum, premium, or discounted pricing strategies.

Our participant telephone, online, and face-to-face surveying and interviewing is supported, compiled, and analyzed by a combination of human expertise and systems compilation, statistical analysis, graphical representation, and actionable reporting.

The Power Capital Consulting team has been conducting market research studies, and eliciting information on a daily basis for our clients for the past 15 years.  We are a group of seasoned, highly skilled experts, who pool our expertise in providing our clients with on point, in-depth, applicable data, customer and client mindset analysis, conclusions, and commercially applicable recommendations.

As with our other services, a large array of statistical analysis (CHAID, cluster, conjoint, correlation, linear and non-linear regression, factor and multivariate analysis, multidimensional scaling, structural equation modeling, others) alternatives are available in assisting our derivation of meaningful results and formulating recommendations.
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