- Created by: HULKSMASH
- Created on: 29-10-19 07:26
Sales of a business/ Total sales in the market x 100%
- This indicates a market leader.
- Influence other companies to follow the leader.
- Influence the leader to maintain position.
- Business with a small market share may set a target of increasing its hare by 5 per cent over a period of time.
- Indication of the sucess or failure of a business or its strategy.
Total Revenue or Total Expenditure:
Total Revenue = Price x Quantity
Price Elasticity of Demand= % change in quantity demanded/ % change in price
- Price elasticty is less than 1 demand is said to be price inelastic.
- Note that the minus sign is not used to determine whether goods are price elastic or price inelastic.
- It is enough to focus on the numerical value.
- Influencing factors: Time, Competition for the same product, Branding, The proportion of income spent on a product, Product types vs product of an individual business.
Calculation of Income Elasticity of demand:
Income elastcity of demand = % change in quantity of demanded / % change in income
- If the value of income elasticity is greater than 1, demand is said to be income elastic.
- If the value of income elasticity of demand is less than 1, demand is said to become inelastic.
- Can show if goods are inferior or normal goods.
- Normal goods, an increase in income results in an increase in demand, the value of income elasticity will be postive(+).
- Inferior goods, increase in income elasticity will be negative (-)
- Influencing factors: necassities, luxaries
- Significance of income elasticity of demand for a business: Business selling goods with high income elasticity, business selling goods with low income elasticity, production planning, Product switching.
Price = unit cost + (mark-up x unit cost)