Application On Price Elasticity Of Demand In Enterprise Price Decision

Enterprise’s price decision often take the market demand as the guide, take the cost asthe foundation, and take the competitive price as reference.The nature goal of enterprise is tomake more proft. As we know, Profit is the function of price,sales volume and cost. The profitdepend on the price and sales volume when cost is constant. The change direction of salesvolume is often opposite with the price’s. Sales volume will decrease if price rises and it willincrease if price drops. The purpose of this paper is to establish the reasonable price schemeand sales volume scheme through weighing up price against sales volume. At the sametime,this paper discuss the price adjusement ratio range which can make sure the sales incomeand sales contribution increase.This paper put the price and sales volume scheme of reactive black of company A ascase. The important meaning that price elasticity of demand guide enterprise to make pricedecision mainly reflects in the following three aspects. First, it is helpful to master how toadjust sales volume when the price changes in order to guarantee profits constant throughusing the necessary demand price elasticity. Second, it is useful to master how to weigh upprice against sales volume and how to make reasonable price scheme and sales volumescheme through using the price decision mode that this paper provides. Third, this paperdiscusses the price adjustment ratio range that can ensure sales revenue and sales contributionincrease at the same time.The research technique of this paper is mainly case analysis.The main content of this paperincludes the introduction, dye market analysis, Price elasticity of demand and the necessarydemand price elasticity, price decision model, the extended analysis and the conclusion.Through the analysis, the main conclusion of this paper is as following: firstly, as for fallin price, enterprise profit will increase when the actual price elasticity of demand is more thanthe necessary demand price elasticity, enterprise profit is unchanged when the actual priceelasticity of demand is equivalent to the necessary demand price elasticity, enterprise profit will reduce When the actual price elasticity of demand is less than the necessary demand priceelasticity. Secondly, as for rise in price, enterprise profit will increase when the actual priceelasticity of demand is less than the necessary demand price elasticity, enterprise profit isunchanged when the actual price elasticity of demand is equivalent to the necessary demandprice elasticity, enterprise profit will reduce When the actual price elasticity of demand isbigger than the necessary demand price elasticity. Thirdly, this paper deduces the priceadjustment ratio range that can make sure the sales income and sales contribution increase.