Evaluation and use of price elasticity of demand to justify managerial decisions

Abstract

The issues of the measurement of demand price elasticityare revealed in the article. The idea about simultaneous applying of three methods of price elasticity estimation in the case of limited access to the factual data is justified. The analytical, approximational and revenue-relational methods of price elasticity estimation are applied to the chosen group of organic detergents. Factual data concerning sales of organic products in eighteen-month period are generalized and statistically processed. Numerical characteristics of the price elasticity for several organic commodities are calculated with the help of point elasticity formula. It is revealed that at current prices nearly all analyzed organic goods demonstrate coefficient of point elasticity which is much higher than one. On the basis of our findings the conclusions about possibilities of pricing as an element of management in trade on the market of organic products are made.