Elasticity and Product Life Cycle

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z Elasticity & Product life cycle 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 Sales ($,000) year launch growth maturity decline PED: Likely to be low – consumers may be prepared to pay high prices AED: Likely to be high – informative advertising could lead to considerable consumer interest XED: Depends on the number and closeness of substitutes – a unique new design will have a very low XED as price changes of other goods will have little impact on demand YED: Depends on whether the product is launched in a prestige niche market (high YED) or low-image mass market (low YED)

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z Elasticity & Product life cycle 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 Sales ($,000) year launch growth maturity decline PED: Might be increasing as new rivals come into the market and appear more attractive – businesses may have to lower prices AED: Likely to be low – most consumers will now be aware of this product XED: More competition and if prices of rival products are lowered, XED likely to high and positive YED: Depends on the nature of the product

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z Elasticity & Product life cycle 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 Sales ($,000) year launch growth maturity decline PED: Prices may be lowered at this stage but PED might be low if consumers would really prefer a newer product. Time for an extension strategy? AED: low – unless advertising is used as part of a re-launch extension strategy XED: High and positive as rival’s substitute products increase in number YED: The product may now become an ‘inferior’ good and YED could be negative

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