Demand and supply are the primary concepts of economics and these are what determine the cost of any given item. When demand of a certain item increases, most commonly it is followed by a corresponding embrace supply. And therefore the price is definitely affected. However there are times when demand increases more sharply than supply and this causes selling price to move up. Regardless, price is directly dependent on source and require trends of your commodity. Selling price elasticity of demand identifies the economic condition when any enhancements made on price of any good and service produces some kind of response in its require. When require is affected by price, we can say that quantity required is flexible. On the other hand once demand is still constant or change in cost produces minor change in volume demanded, all of us consider it a price inelastic scenario. When a company wants to change the price of any good or service, it takes to take some things into mind to find out in the event quantity required would prove to be elastic or inelastic.
Firmness of require is measured as:
proportionate change in variety demanded
-proportionate change in cost
Hayes Lemmerz International Inc. is the leading manufacturer of lightweight aluminum wheels in the world. While it looks forward to 32% market share in North America, right behind their arch-rival Excellent that has a market share of 37%, still the moment seen by a global point of view, Hayes is infront of Remarkable in this field. Hayes desires to increase it is market share in North America nevertheless can do this as long as it lessens the price partially because really already many 2 during a call and a small price alter can entice hordes of new customers. However before deciding on a change in price strategy, Hayes must take those following things into consideration:
Opponent and Substitute products:
Hayes must consider all the substitutes present in the industry for this product. Superior’s aluminum wheels are actually posing a threat because the firm likes a leading situation in United states Market. Hayes must not intercontinental important secret that fewer the alternatives; lower the elasticity. Basically, when there are not too many alternative/rival products to choose from, the company’s decision to change the purchase price will not in a negative way affect demand.
Luxury or necessity: Hayes must initially determine in which category their