Marketing EssayWhen you raise the price of most items, people will buy less of them. For example, when British airline raises its price, air passengers may switch to a rival airline, such as Lufthansa (they offers the same high standards for little cheaper prices), or to the Ryanair (they offer cheap tickets and standard quality, for travel in Europe).
When companies reduce the price of most items, people will buy more of them. For example, when supermarkets make special offers with reduced prices (such as Tesco, they provide special offers all the time), they expect a sharp increase in same sales. Price also would change in the quantity bought. Business need to have a clear measure of how the quantity demanded will change as a result of a price change. The relationship between price and quantity demanded is measured by 'price elasticity of demand' . This is calculated as: change in sales/% change in price. For example when Sony reduce their price for particular good, the demand for it is price elastic. Any change would affect the sales and ratings. For example when apply increase their price for particular good, the demand for the good is price inelastic. Any changes in price in only half the proportional effects on sales. The more the customers have good substitutes available, the more demand will be, when where there are few if any alternatives, price is usually inelastic. As a general common sense rule is ‘the higher the price of a particular good, the lower will be demand for it’. Markets consist of individual or groups of businesses that are prepared to supply a product, and customers who demand the product. Market price is determined by the interaction of the forces of demand and supply. The market research helps to find about price changes in demand. Within this market company’s are able to get price decisions just right. There are two factors in demand for goods and services: Economic factor(more incomes) and Social Factor (changing social trends).