Elasticity and Its Coefficient - Special Academic Support

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The economic sphere of societys life and the market function according to certain laws. Knowledge of these features is essential for the effective operation of any business and understanding the impact of price and non-price factors on changes in supply and demand. To make different decisions on development, companies and organizations have little knowledge that rising prices for goods cause a reduction in the volume of demand for them. To do this, it is also vital to have information about the economic markets level of sensitivity and sensitivity. This indicator is expressed in elasticity and its coefficient.

Such indicators influence the price elasticity of demand as the demand for and the value of the product for consumers. Thus, if a product is a necessary part of the daily life of society, then the demand for it will be inelastic to price changes and vice versa. Moreover, the availability of substitute products on the market and their availability, the part of the costs that consumers are willing to separate for the product, and the level of market saturation with this product play an important role. In the case when the market is oversaturated with any product, the probability that the business will be able to promote sales by reducing prices is small and vice versa. It is also worth noting such an aspect as the variety of ways to use the product since the more areas of use, the more elastic the demand for it is.

BMW was chosen as an example of a company with elasticity, and Louis Vuitton was chosen in the absence of elasticity. Asadinejad et al. (2018) state that elasticity reflects customer reaction to economic offers (p. 26). BMW is a German company that is engaged in the production of vehicles. BMW is a leader in the car sales market; it produces more and more products every year. Louis Vuitton is a French fashion house most famous for its fashion collections of clothing and accessories. The company has never felt a particular need for customers. The brand focuses its attention on attracting a rich public, which significantly reduces the circle of its consumers.

For the best price solutions for these companies, regardless of their elasticity, margin analysis can be applied, avoiding non-refundable costs. This study can provide an opportunity to understand the relationship between a products price, its production volume, direct costs per unit produced, the total amount of fixed costs, and mixed costs. A significant advantage of using margin analysis is the chance to investigate and measure direct and indirect relationships and dependencies. In addition, the use of this method in the financial management of enterprises allows for managing the process of forming a valued policy more effectively.

In addition, opportunity costs are of particular importance for making price decisions. Opportunity costs represent the lost profit that may arise when choosing options for using certain economic resources with the subsequent rejection of others (Karpac & Bartosova, 2020). Such a concept is a necessary tool in making effective economic decisions related to the value policy. This is due to the fact that the assessment of future resource costs should be carried out based on a comparison with the most effective way of using them.

It is worth noting that more effective decisions made by businesses can benefit them and consumers. The business needs to conduct various market research and consumer attitudes to the manufactured product to do this. Thus, the optimization of production that is constantly taking place in the BMW company contributes to the greater satisfaction of its customers. At the same time, the concept of a consequentialist approach to ethics is taken into account. It is based on the fact that the entire content of morality is determined by the requirement to increase the benefits. The second type of ethics is deontology, which identifies a number of unacceptable actions, despite how beneficial the consequences of their commission will be.

Making effective decisions for both production and consumers is an essential aspect of the economy. Buyers in the modern world have become the initiators of the creation of products, becoming direct participants in the production process. Peoples positive attitude helps to reduce the marketing costs of the enterprise and makes it possible to set higher prices for the products produced (Thiruvattal, 2017). This is because an increase in the level of loyalty of consumers provides an increase in price elasticity, and people are willing to pay more. Besides, the preferred attitude of consumers allows a business to retain some of its loyal customers during a crisis.

Summing up the above, running a successful business depends on many factors. Among them are elasticity, margin analysis, and opportunity cost research. In addition, at the current stage of market formation, it is vital to form consumer loyalty. The growing competition makes it necessary to make the most effective decisions constantly. They may include ways to maintain a high level of performance and maintain a position in the market.

References

Asadinejad, A., Rahimpour, A., Tomsovic, K., Qi, H., & Chen, C. F. (2018). Evaluation of residential customer elasticity for incentive-based demand response programs. Electric Power Systems Research, 158, 26-36.

Karpac, D., & Bartosova, V. (2020). The importance of opportunity costs in financial management in connection to economic profit. Fifth International Conference on Economic and Business Management, 159, 350-353.

Thiruvattal, E. (2017). Impact of value co-creation on logistics customers loyalty. Journal of Global Operations and Strategic Sourcing, 10(3), 334-361.

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