what determines when it is a good time for a company to raise or lower the...

what determines when it is a good time for a company to raise or lower the price of their product using pricing of elasticity demand

Expert Solution

The price level affects the demand for a good or service. The price elasticity of demand can be used to measure the sensitivity of a change in the quantity demanded of a good or service relative to a change in its price. A change in the price level of a good or service determines the elasticity of the good.For example, luxury goods have a high elasticity of demand because they are sensitive to price changes.

The best time to raise prices is when the company is sure customers are satisfied with the product or service.If the demand is inelastic and the company is sure that the customer are fully satisfied with the product and they have build a good brand image then they can increase the price keeping in mind they do not have any close substitute. Likewise they should lower the price if they see there is close substitute in the market and therefore to attract the customer they should reduce the price in order to increase the sales.

If company decide to raise or lower prices, they must pick the right time. If you're lowering prices, choose a time when the change will have the most impact; if they are raising prices, choose a time when they will encounter the least resistance. Business's seasonality, growth stage and sales cycle affect their choice.

Rahul Sunny answered 1 hour ago

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