Part 1. Marketing Strategy
Published Online: 15 DEC 2010
Copyright © 2011 John Wiley & Sons, Ltd. All rights reserved.
Wiley International Encyclopedia of Marketing
How to Cite
Prasad, A. 2010. Demand Elasticity. Wiley International Encyclopedia of Marketing. 1.
- Published Online: 15 DEC 2010
The price elasticity of demand is a well-established concept with many implications for pricing strategy. This concept together with the interrelated concepts of cross-price elasticity and income elasticity of demand is covered. First, the price elasticity is defined and several illustrative examples of the same are provided. This is followed by a discussion on the economic theory relating elasticity and optimal pricing in monopoly and competitive markets. Recent empirical findings regarding the determinants of pricing are mentioned. Next, the topic of cross-price elasticity of demand is introduced and its application to market structure analysis is presented. The article concludes by relating income elasticity to the remaining elasticities.
- pricing strategy;
- inverse elasticity rule;
- market structure;
- income elasticity