Elasticities of demand

Assuming no other changes, sales revenue for a product will stay the same if:

A company sells a single product: Product A.

Table 2 Income and price elasticity of demand for Product A

During the next year:

• consumer incomes fall

• the price of Product A increases.

Based solely on the information provided above, analyse how the sales revenue for Product A will change over the next year.

A product’s price rises by 20% and its sales volume falls by 10%. All of its competitors leave their prices unchanged. The product’s market share, as measured by sales volume, remains the same.

Which of these statements is false ?

Statement 1: ‘A business might improve the quality of its product in order to make its demand more price elastic.’

Statement 2: ‘A business might improve the quality of its product in order to increase added value.’

Read Statements 1 and 2 and select the correct option from the following options.

What is meant by the term extrapolation?

Using Appendix B, calculate the combined market share of the top four tea brands in 2019.

Using the data in Appendix D, explain one benefit of the use of market segmentation to a business selling tea.

A business sells two types of tea: black tea and health tea.

Analyse how the data in Appendix C will affect how this business might change the price it charges for each type of tea to increase its sales revenue.

To what extent does the information provided suggest that now is a good time to launch a new brand of tea?

A business sells four products.

The table below shows the price elasticity of demand and income elasticity of demand for the four products.

A year ago, all four products had identical sales volumes. Since then, each product has had the same percentage cut in price and there has also been a fall in consumer incomes.

Which one of these products has the highest sales volume now?