BUSA40441 Business Decision Making

Business Decision Making Using Demand, Supply, And Elasticity

Information on the demand of a commodity, its supply, and elasticity provide the basis of decision-making in the pricing strategies. An increase in demand for products at a constant supply may necessitate the increase in the price of a commodity, which increase in the revenue for the product. While price reduction can be utilized to increase sales volume for a declining revenue from the product. However, changes in pricing strategy based on the demand for the product may not provide the desired results if demand changes are caused by other factors such as customer preferences. Changes in supply would influence pricing strategy, with the prices being lowered when the supply of substitute goods in the market increases. A possible increase in price can be achieved with fewer substitute goods in the market (Lumen, 2019). Changing the pricing strategy would be more effective by considering whether the product’s demand is elastic, inelastic, or unitary. An elastic demand would increase company revenue with decreased prices and a reduction in revenue with increased revenue. Therefore, in making a pricing decision in an elastic demand market, considering other factors such as customer preferences would impact their demand for the product. An inelastic demand provides the opportunity to increase the price with an expected increase in revenue due to limited customer preferences.

The joseph story shows the influence of demand on the decisions a manager would make; joseph recommended the production of more agricultural products in an anticipated rise in demand in the future, which would influence pricing in the future. Boaz’s story shows similar relations with Joseph’s story; while Solomon’s story depicts the influence of customer preferences on pricing strategy, the queen and other kings would make very high prices to hear Solomon’s wisdom due to the limited preferences.

References

Lumen. (2019). Pricing Products | Boundless Business. https://courses.lumenlearning.com/boundless-business/chapter/pricing-products/

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