Saturday, 12 January 2013

Price Elasticity

Back in September 2007, Hovis was the first bread brand to sell its bread at £1 per loaf, while its competitors only raised their prices in December 2007.
So, what happened to Hovis after this? 
A fall in demand of its bread products, as it lost market to Kingsmill and Warburtons.
This is an example of price elasticity.

The exact definition of price elasticity is "the change in demand for a product when the price of the product changes".
There are two key terms, PRICE ELASTIC and PRICE INELASTIC.
Price elastic is when there is a major change in demand for the product following a change in price. 
Example: Flight tickets. If the price of a flight ticket to UK is increased, there will be a sudden decrease in the demand for it, because there is a limited market who can afford to go for holidays.
Meanwhile, price inelastic is when there is only s minor change in demand for the product following a change in price.
Example: Petrol. Not much changes will happen even if the price of petrol is increased, because there isn't an alternative fuel to petrol. We'd still have to stick with it no matter how much the price goes up.
Just a short post today to keep you updated!


Riley, Jim. A Good Example of Price Elasticity of Demand. 4 March 2008. 12 January 2013 <>.

tutor2u. Price Elasticity of Demand. 12 January 2013 <>.

1 comment:

  1. This is how, demand can be just a spare thing, if you don’t understand the basic rules of business. This blog is very interesting and I will recommend this to everyone.