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Elasticity: Determining How Companies Price Products

Why demand curves matter when firms set prices for goods and services.

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In recent months, CEOs at leading corporations have been talking a lot about “elasticity” with their shareholders. As Americans contend with rising prices due to inflation, companies are concerned with just how elastic their pricing practices can be. This video examines the concept of elasticity and the role it plays in determining how companies price products. 

Questions:

  1. What is price elasticity, and how is it affected by inflation?
  2. What are some ways that companies like Procter & Gamble try to maintain market share as their products become more elastic?
Author: NickelsMcHughMcHugh