Effect on pricing policy can be profound and far reaching

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Elasticity’s effect on pricing policy can be profound and far reaching. A poorly thought out price increase can drive profit down considerably. Likewise, a price cut might drive demand up to a level that the business cannot keep pace with thus disappointing customers.

(A) What factors need to be considered in making price changes for a product or service that shows an elastic price response?

(B) What factors need to be considered in making price changes for a product or service that shows a unit elastic price response?

Reference no: EM131091389

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