2 Determine Demand Price sensitivity Estimating demand curves Price elasticity of demand O Copy rights reserved, Zou Deqiang 11
11 11 © Copy rights reserved, Zou Deqiang 2 Determine Demand • Price sensitivity • Estimating demand curves • Price elasticity of demand
Price Elasticity Price elasticity is calculated by dividing the percentage change in unit sales demanded by the percentage change in price Demand is said to be"elastic when a small price change significantly increases or decreases demand Demand is said to be "inelastic when a price change does not significantly change the number of units demanded O Copy rights reserved, Zou Deqiang
12 12 © Copy rights reserved, Zou Deqiang Price Elasticity • Price elasticity is calculated by dividing the percentage change in unit sales demanded by the percentage change in price. • Demand is said to be “elastic” when a small price change significantly increases or decreases demand. • Demand is said to be “inelastic” when a price change does not significantly change the number of units demanded
Price Elasticity of Demand a) inelastic demand curve b) Elastic demand curve 上 O Copy rights reserved, Zou Deqiang
13 13 © Copy rights reserved, Zou Deqiang Price Elasticity of Demand
Demand Is Likely to Be Less Elastic When There are few or no substitutes or competitors Price increases are not readily noticed Buyers are slow to change buying habits Buyers can justify higher prices O Copy rights reserved, Zou Deqiang
14 14 © Copy rights reserved, Zou Deqiang Demand Is Likely to Be Less Elastic When… • There are few or no substitutes or competitors • Price increases are not readily noticed • Buyers are slow to change buying habits • Buyers can justify higher prices
3 Estimate Costs Types of costs Variable >Fixed Accumulated production Activity-based cost accounting Target costing O Copy rights reserved, Zou Deqiang
15 15 © Copy rights reserved, Zou Deqiang 3 Estimate Costs • Types of costs ¾Variable ¾Fixed • Accumulated production • Activity-based cost accounting • Target costing