MGMT 4A Lecture Notes - Lecture 9: Prescription Drug, Pricing Strategies, Target Market
Document Summary
Mgmt 4a lesson 3, part 3: elastic, unit elastic, and inelastic demand; demand price. Three types of graphs for elastic/inelastic demand. Elastic demand (slope is usually less steep) Unit elastic demand (slope is close to a 1/1 ratio) Percentage change in price results in a larger percentage change in quantity demanded. Perfect elastic demand = horizontal line (slope = 0) Percentage change in price result in smaller percentage change in quantity demand. Perfectly inelastic = vertical line (slope = undefined) Percentage change in price results in same percentage change in quantity. Key determinant of price elasticity of demand. The greater the number of substitute items, the greater the elasticity of. Example: beef have a lot of substitutes such as chicken, fish, pork the product. The narrower the product definition the more elastic the demand. Branded gas is more elastic than the demand for generic gasoline.
