Price and Income Elasticity of Demand

% Change in demand/ % Change in price

• Elastic ( less than 1) - bigger change in demand than price.
• Inelastic ( more than 1) - smaller change in demand than price.
• Unitary ( equals 1) - no change in demand.

• Availibility of substitutes
• Time
• Product type
• Proportion of income spent

Data is hard to get.

• Marketing/branding
• Production
• Price setting
• Less risk
• Predict demand
• Forecast sales

% Change in demand/ % Change in income

• Inferior ( less than 0) - demand falls as income rises.
• Normal (0-1) - demand increases at a slower rate.
• Luxurt (more than 1) - demand increase faster.

• Respond to economic changes
• Plan
• Strategy
• Product portfolio
• Sales 
• Meet demand

• External factors
• New technology
• No guarantee