Drew McLellan has a great blog post about pricing elasticity. This is not an economics article, but a savvy marketing piece about which direction your pricing should go to keep you one step ahead in this turbulent economy.
He starts out by introducing the following points about pricing elasticity.
- The elasticity of price is a one-way street (we are never happy about going higher in price after the marketplace reduces costs.)
- The elasticity of price is fast-acting (we get used to the higher price pretty quickly.)
- The elasticity of price works best for necessities (we can cut back on stuff we don’t “need” but endure price hikes on stuff we think we do need.)