What Is Flexible Pricing?
Flexible pricing strategy refers to the principle or technique of determining the direction of price adjustment based on price elasticity.
Flexible pricing strategy
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- Chinese name
- Flexible pricing strategy
- Definition
- Principles or techniques of price adjustment direction
- Content
- reflect
- Flexible pricing strategy refers to the principle or technique of determining the direction of price adjustment based on price elasticity.
- Price elasticity is also known as the elasticity coefficient of the price that affects the quantity of demand.
- Price elasticity =% change in demand /% change in price
- It can reflect the degree of change in the amount of demand affected by the rate of price change, and represents the percentage of decrease (or increase) in demand for each 1% increase (or decrease) in price.
- In economics, the absolute value of price elasticity can reflect the relationship between demand and the level of price changes. There are three main situations:
- 1. The absolute value of price elasticity is greater than 1, which is simply referred to as large elasticity. It shows that when the price changes in a small range, it can cause a large rebound in demand.
- 2, the absolute value of price elasticity is less than 1, referred to as small elasticity. Shows that even the price changes are large. The amount of change in demand will not be too great.
- 3. The absolute value of price elasticity is equal to 1. It shows that the amount of demand affected by price changes is completely consistent with the price itself.
- Price elasticity. Explains the magnitude of the level of change in the opposite direction between commodity prices and demand. As for a certain product in different periods and different sales, its elasticity may be large or small; even different products under the same conditions, there may be large or small elasticity. If the elasticity is large, the price will decrease, which will increase the demand greatly. Therefore, the price reduction method should be adopted for the products with high elasticity, and the small profits will be sold. Not only should the price of less elastic goods be lowered, but the price should be appropriately increased within the range permitted by the conditions.