Estimating the Price-Response Function
How much will sales volumes - and profits - change if you change your price?
A small price change could cause sales and profits to skyrocket - or could destroy profits because sales hardly change. Do you know which is the case for your products? Is there a way to test whether price changes might lead to higher profits? In this video, I'll:
- Explain what the price-response function is and how it differs from the supply and demand curves of economics
- Show when the price-response curve is steepest and flattest
- List times when customers are more price sensitive
- Walk through ways to estimate the price-response function for small price changes at your company