Elasticity of Demand
How much do you really want it?
This is a cool concept to be familiar with as a business person because it helps us calculate the best price for our product or service. By best price I mean the one that maximizes revenues.
Pricing is a tricky subject and the price elasticity of demand helps us make good pricing decisions by measuring the effects of price changes on our overall revenues.
We can model demand using crowd funding campaigns and other methods.
Demand is modeled in order to understand how many people are willing to purchase a product or service at a various price points. Elasticity of Demand is a metric that measures the sensitivity to change in quantity demanded relative to a change in price. It is a measure of the slope of the demand curve. The more horizontal the demand curve, the more a change in price will affect the quantity demanded. The more vertical the demand curve, the less a price change will affect quantity demanded.
If you are a smoker, cigarettes have a pretty steep (vertical) demand curve. If the…
