Price Elasticity Question: How Can Term Paper

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Second, it's possible to use price elasticity as an
indicator of a product or services' level of necessity or luxury, the
proportion of income required to purchase the item, and the time period
covered for the purchase all indicate highly elastic products. Inelastic
products often have many substitutes, are more commodity-like, and are sold
through bundling, convenience offers and drastic discounting.
Price elasticity then can be used to define competitors not only by
designating which products are potential substitutes, but also by the
percentage of a persons' income needed to complete the purchase and the
time horizon of the purchase. Most important of all, pricing elasticity
indicates which strategies competitors will take at the exclusion of price.

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This can be insightful to see how a competitor in an inelastic market will
rely on promotional strategies, product bundling, new distribution
arrangements, and also even entirely next generation products to compete.
Pricing elasticity then can indicate not only which the most dominant
competitors are, but also what their likely competitive strategies will be
depending on the relative elasticity of the markets they are competing in.

Reference
USA Today (2004) - Wal-Mart cutting prices on more than 100 toys.
Accessed from the Internet on August 2, 2007 from location:
http://www.usatoday.com/money/industries/retail/2006-10-18-wal-mart-
toysx.htm.....

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