Term
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Definition
- As you go up in price, demand goes down
- ^ Law of Diminishing Demand |
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Term
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Definition
- the place the demand and supply curves intersect
- where the market should be |
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Term
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Definition
- Some consumers are getting more than their money's worth because they were willing to pay more than the equilibrium point
- when you expect to pay more, but they price is lower than expected |
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Term
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Definition
- How sensitive is demand to price changes
- If I lower my price, how many new customers will I have? |
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Term
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Definition
Consumers are sensitive to a price change
- % chagne in price < % change in quantity |
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Term
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Definition
% change in price > % change in quantity
- demand doesn't stretch that much |
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Term
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Definition
% change in price = % change in quantity
- total revenue doesn't change |
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Term
| Factors affecting elasticity |
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Definition
1) availability of substitutes
2) absolute size of purchase
- bigger items have more elastic demand
3) relative size of purchase
- depending on size of your income
4) urgency of need
- people don't look at price as much during emergency
5) consumer or organizational customer
- consumers are more likely to be price sensitive than a company (elastic demand)
- organizational command (inelastic demand) |
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Term
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Definition
- homogeneous product
- many buyers and sellers
- ease of entry for buyers and sellers
- elastic demand for individual sellers
- price taker: you have to take the market price (in pure competition theoretically you can sell everything you produce, but can't go below or above market price) |
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Term
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Definition
- mostly homogeneous product
- there are a few big sellers (only major players)
- 'Kinked' demand curve
- fairly inelastic demand for industry
- not purely a price taker, but you usually are |
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Term
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Definition
- heterogeneous products
- sellers feel they have competition
- varying marketing mixes to differentiate |
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Term
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Definition
- one company selling a unique product
- price controls by government |
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