In your responses, comment on at least two posts from your peers and share an example of a company that experienced a change in revenue as the result of a change in the price of the good or service they provided. After reading your peers’ posts, explain which determinants of price elasticity of demand could be the cause of the change in demand.
- Mark Pendleton – In the simulation I had 2 of the 3 rounds end with very similar results with the best of those bellow. As I continued to sell the oranges I saw the price fall to towards the equilibrium price over time and as my supply of oranges decreased. This reflects how the magic of the market will correct supply and demand to that equilibrium point over time if either are too high or too low. As the quantity of supply was high I was able to sell my oranges at a higher price but as quantity decreased and time elapsed I had to sell my oranges at a lower cost which decreased my profit margins. But it seems like it was falling into that equilibrium point where my supply quantity and price met with the buyers demand quantity and price.
In my own business if I were to sell model airplanes I would have a very elastic demand that would affect my pricing. Because this would be considered and luxury as well as having substitute options like model cars, trains, boats… buyers would be able to easily switch if my prices are too high. I would constantly need to adapt my supply to keep my prices competitive and maintain a higher revenue.
Three examples of determinants of price elasticity of demand are whether the products are luxuries or necessities, if they have compliments or substitutes, and if the product has narrow or broad market.
- Brandon Deatherage – In my simulation, I was able to make a small profit, but this is purely due to people not wanting to pay full asking price for my product. This could have been due to a large supply of oranges in the market, which will drive the price down. My first orange sold went for the highest amount, and as the demand lowered, the selling price went down. If I owned my own business, my pricing would have to be monitored by a CRM program of some sort, in order to maximize profits. I would need to identify where my items are in low demand and mark these down, and find where to make up that loss.