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PED for Lightbulbs

Introduction

This report has been produced to analyse the possible implications of increasing the price of our 100Watt light bulbs by 20%. Presently the cost of a light bulb is £0.80. This report will aim to fully assess and evaluate the price elasticity of demand of the product, which will enable an informed decision to be made on whether a price increase will be financially viable for the company.



Concept of price elasticity

The concept of price elasticity of demand (PED) is to measure the responsiveness of the quantity demanded to a price increase or decrease, with all other factors remaining the same. This is achieved by comparing the percentage change of the price of a product, in relation to the percentage change in demand for that product, and is calculated as follows,

PED (price elasticity of demand) = Percentage change in the quantity demanded
Percentage change in the price

The determining factor ...

Posted by: Tricia F. Doyle

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