essay on price elasticity of demand and supply

Price Elasticity of Demand Essay

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

The Concept of Price Elasticity of demand in Healthcare

Elasticity means to the amount of receptiveness shown in supply side or demand side relative to variations in price. If a curvature is much more elastic, then minute amends in price will make big variations in quantity used. If a curvature is not as much of elastic, then it will make big amends in price to cause a variation in amount used. It can be illustrated by the form of the supply side or demand side curve.

Price elasticity of demand

It submits to the extent of receptiveness in demand side quantity in relation to price. In the example given below demand side is very elastic. It can be seen that if the price varies from US$ 0.75 to US$ 1, the quantity amount lowers.

Explanation behind this can be that the purchasers might have access to an alternate medicine, so that as the increment in price occurs, he does not accept it. Other explanation could be that the purchaser didn’t find the medicine good enough, so any little variation in price has a big impact on the medicine’s demand.

Source: Quantity q Elastic Demand

Healthcare – A general view with reference to price demand elasticity

The healthcare sector constantly experiences price elasticity on its demand side regardless of different methodologies and researches. Even though the array of price elasticity approximations is comparatively broad, it inclines to middle on minus 0.17, implying that one per cent raise in the amount of price within healthcare sector will direct to a 0.17 percent decrease in expenditures.

The variation caused by the price factor in the demand side can be associated to variations in the prospect of reaching any care rather than the variations in the frequency of stopovers.

Additionally, the research constantly discovers lesser amount of demand elasticity at lesser stages of sharing cost. The health side demand is also believed to be inelastic in respect to income. The approximations of elasticity on the income level are in-between 0 and 0.2.

The optimistic signal of the elasticity standard suggests that as income level rises, the demand side will also experience a rise. The scale, though, proposes that the demand side reaction is moderately little. Healthcare demand is considered by many specialists to be inelastic.

If a person is ill, he is not going to show sensitivities in price. However some do fall away from the domain or e.g. surgery such as any form of plastic surgery or when you are buying eyesight glasses. Price elasticity was -0.2 in a study conducted by RAND Health Insurance for medicine expense .

Is the demand Elastic-Healthcare

Another research suggested that the healthcare associations with prices are elastic. Its outcome suggests that the elasticity of healthcare and price are at -2.3 diagonally 0.65 to 0.95 tier of the allocation of expenditure, with a spot-wise 95precent assurance space at the 0.80 tier of -02.5 to -02.0.

Even though the research permits to project the change with the degree of expenditure, it concluded that the projections were quite steady over the projected tier. As the quantity side is associated with the price side, it requires unsystematic surprise to quantity side in respect to recognize elasticity.

When a family member has an injury, it would not influence the healthcare spending of others within the family i.e. if they are not facing injuries themselves. Though, the damage will utilize up a big section of a family’s amount and hence bring down the insurance of the whole family rates from hundred percent to twenty percent .

Few illustrations

Price division is the expression used to explain diverse shapes of straight charging for medical treatments. In the United Kingdom, a lot of citizens have to give treatment charges that they are liable to pay whenever they require treatment or are given prescriptions. This treatment charges have their own effects.

In projection, it is shown that the treatment’s demand is somewhat inelastic to price, having a negative 0.32 mean value. This implies that the treatment expenses charged are a good method to get funds, but they do not have an impact of any significance over demand.

It was established in the research that increment in the treatment money charged from the 90’s i.e. 3.75 pounds to 4.25 pounds accumulated into a hefty amount which is thought to be in excess of 17 million pounds in additional returns but what they did was, it guided to a drop of 23 hundred thousand in the figure of treatments and prescriptions given.

This study also recommends that with the passage of time, treatments and remedies disbursed will become more and more elastic to price. The Hughes and McGuire research concluded that the increment in treatment services in healthcare are going to lift lesser proceeds but in turn direct to larger decrease in usage of approved medications compared to what it did during the past .

During the year 2005, Ireland was graded the least of the European Union in relation to the medicine cost per occupant. The major causes for such a boost in Ireland included the prescription of fresher more pricey drugs, the amplified quantity of treatments as well as the alterations which took place in the qualifying standard.

During the year 1997, the standard charge per disbursed medicine was around 11 pounds to 11.50 pounds in contrast with twenty three to twenty four pound in the year 2007. As the overall populace demographic patterns are altering, the prescription rates are also altering. Since the number of older people in Ireland has been increasing, the demand for treatment has been increasing too.

It can be established that the demand in healthcare within Ireland is correlated as the prices of medicines are elastic to number of patients being treated. Similarly, the prices of medicine are also found to be elastic to the number of medicines disbursed. From the year 2000, Ireland has faced an upward trend in prescriptions of defensive/preventive drugs or treatment, a good example for which is the Statins .

In a study carried out in the state of Massachusetts a subsidy was endorsed, for a chance to calculate the healthcare demand for the price elasticity function. The MEPS from the year required 2005 to the year 2007 demonstrated the figures that the people put out or consume over healthcare outflow, a substitute for the amount needed i.e. the demand and their average healthcare funding consumption, a substitute for the pricing.

The graphs presented below, depict the points showing the descending inclination of the demand curvature. The elasticity for demand for the years 2005 and 2006, and the years 2006 and 2007 price is -1.95 and -0.18 respectively. Both are found to be inelastic, which means a sharper curvature for demand, which signifies a bigger advantage from the healthcare sector financial support.

Source: Number in Massachusetts with a Healthcare Expense

Source: Summary

Works Cited

Barry, Michael, et al. “Projecting the Impact of Demographic Change on the Demand for and Delivery of Healthcare in Ireland.” 2009. Web.

“Elasticity.” 2011. Spark Notes. Web.

“ Is healthcare demand elastic? ” 2009. Healthcare Economist . Web.

Liu, Su and Deborah Chollet. “Price and Income Elasticity of Demand for Health Insurance and Healthcare Services: Acritical Review of the Literature.” 2006. Mathematica. Web.

Maguire, Jon. “Hotspots for Healthcare Savings.” 2011. My Data Mine . Web.

“Price elasticity of demand (PED).” OheSchools. Web.

Ringel, Jeanne S., et al. “ The Elasticity of Demand for Healthcare. ” 2005. Web.

• Liquid Mirror Telescope Technology
• Calculating Elasticity Coefficients
• The Elasticity of Demand as the Prominent Factor in Marketing
• Statistics for Economics
• Current Financial Market Events and their Implications
• Capital Asset Pricing Model
• The Concept of Leasing
• Bank of America and Silver A-Plus Card
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2019, March 27). Price Elasticity of Demand. https://ivypanda.com/essays/price-elasticity-of-demand/

"Price Elasticity of Demand." IvyPanda , 27 Mar. 2019, ivypanda.com/essays/price-elasticity-of-demand/.

IvyPanda . (2019) 'Price Elasticity of Demand'. 27 March.

IvyPanda . 2019. "Price Elasticity of Demand." March 27, 2019. https://ivypanda.com/essays/price-elasticity-of-demand/.

1. IvyPanda . "Price Elasticity of Demand." March 27, 2019. https://ivypanda.com/essays/price-elasticity-of-demand/.

Bibliography

IvyPanda . "Price Elasticity of Demand." March 27, 2019. https://ivypanda.com/essays/price-elasticity-of-demand/.

• Call to +1 844 889-9952

Price Elasticity of Demand

Introduction

Economists use the term “price elasticity of demand” (PED) when talking about how prices respond to the supply and demand of a product. A product is defined as “elastic” when it reacts to price changes, which technically means that there is a relationship between the price of the product and demand for it. If a significant price change does not affect their demand, it can be said that it is inelastic. With price elasticity, it is wise to measure the reaction of prices to changes in demand and supply of Software and services. Arbitrage price theory (APT) is a trading method based on asset returns prediction, using expected returns from a range of macroeconomic variables that capture systematic price and quantity changes (Terrizzi and Meyerhoefer 98). It was developed in 1976 by the economist Stephen Ross. Historical investment returns are generally considered relative to factors used to estimate their beta.

A market for a product that is very elastic would mean that it reacts to price changes in response to a significant shift in demand. Conversely, a market that experiences little or no quantitative difference regarding even significant price changes, is considered to be inelastic (Terrizzi and Meyerhoefer 100). Here, price fluctuations affect the demand side of the equation, bearing in mind that price elasticity can be contrasted with demand and price elasticity of supply.

Whether the firm prefers fixed or tiered pricing or is frustrated by freemium, the pricing model discussed here will help the firm to find the optimal way to sell and grow the firm’s software business. Flat-rate prices are probably one of the easiest ways to sell a software solution. It offers all the benefits of a software licensing model that uses the firm’s existing cloud infrastructure, with the bonus that it is usually billed monthly, and is probably the cheapest and most cost-effective. A break-even point must be reached as indicated in the graph below;

For many Software companies, cost calculation (also known as cost-based pricing) serves as a starting point. Cost pricing is the targeted profit margin that increases the firm’s costs (say 20%) and determines the price of the firm’s product. It does not take into account the perceived value or other input factors that should influence pricing. For example, it can be a nudge – a thought process for a price discussion that starts somewhere with often limited information. Developing, marketing, and selling a product requires resources and, of course, money.

Value-based pricing is the only viable option for Software. Pricing is what people think about when they think about the pricing strategy. The reality is that the firms do not need to base the firm’s pricing on maximum revenue – difficult – firms need the right pricing strategies. Quantity is a measure used in economics to indicate the amount required for a Software or service when its price increases by nothing more than a change in price. Explicitly, it specifies a quantity that is needed in response to a 1% price change. Price elasticity is usually negative, although analysts tend to ignore this sign. Still, this can lead to ambiguity.

When prices rise, the quantity on offer usually increases, but consumers “willingness to buy the Software usually decreases. This is called price elasticity of supply and demand, calculated as a percentage change in the quantity required in response to a 1% increase in the cost of the Software. A product that does not have a readily available replacement is likely to be elastic, which means that it is more responsive to price changes than a product. As a result, if sales of the commodity increase by 20 percent, that the prices for the demand for it are 2.0.

Consumers will switch to more affordable options if they have a cheaper product that meets the needs of the recently passed Price Increase Act. The duration of price changes and the necessity of an article are some decisive factors that influence the price of elasticity. The general assumption is that customers buy more Software and services when the product is cheaper, and less when it is more expensive. Known as “price elasticity,” this concept is one of the most quantifiable economic equations that accurately illustrates how responsive customer demand is for a product or service. Most customers are price sensitive in most markets. Even if customers and interested parties do not say that the price is essential, it can still be a necessary factor in their decision-making process.

To understand the price elasticity and demand of the product, there is a need to take a closer look at the core concept of demand and help the firm understand it. Demand is fundamentally based on the quantity of a particular Software that consumers are willing and able to buy at any price along a continuum. This is called “price elasticity” (also known as PEDs) or “price elasticity.”The demand curve is a measure of how consumers react to price changes, suggesting that they are more responsive to price changes. This indicates that the fewer consumers react to rate changes, the higher the demand for the product.

In general, equilibrium is defined as a market situation where prices are such that the quantity demanded by consumers is in the correct balance with the quantities that companies want to supply. The practical application of supply and demand analysis often focuses on the idea that different variables that change the equilibrium price and quantity represent shifts in the respective curves. These comparative static shifts trace the effects of the initial equilibrium to the new equilibrium. A typical and specific example is the graph of supply and demand shown on the right. This graph shows supply and demand as opposing curves, representing the resulting price and the quantity required to achieve the new equilibrium price of that quantity and its corresponding quantity. The intersection of these curves determines the equilibrium prices.

In a price-equilibrium price, the amount delivered does not correspond to the required quantities. If the market price is higher than the equilibrium price, then the quantity delivered is higher than the required amounts, resulting in a surplus. An equilibrium quantity shortens the amount. In a market, equilibrium prices are 60 units and equilibrium quantities 200 units, and the corresponding prices are the “equilibrium price” or market-clearing price.

An equilibrium value is when there is no shortage or surplus of Software on the market. It means that the quantity of Software the consumer wishes to buy is equal to or greater than the quantity supplied by the manufacturer. The market achieves a perfect state of equilibrium when prices stabilize at a level that suits all parties, regardless of the quantity of Software or services available to them. The movement refers to the changes in demand and supply curves that occur when a price change causes quantity changes. If the amount requested rises or decreases, prices must be adjusted to reach the equilibrium price, and vice versa.

The quantity required at a price corresponds to the shift in supply, reflecting the fact that the demand curve does not shift. The equilibrium quantity rises from Q1 to Q2 as consumers move from a higher price (associated with lower demand) to a new lower cost. If price and quantity move in opposite directions, for example, from S 2000 to S 1000, then the equilibrium price also increases, starting with the supply curve S2. However, when the consumer moves from the demand curve to the new low price or shifts the associated small volumes of demand downwards and vice versa, equilibrium volumes decrease, and equilibrium prices rise.

One function of the market is to find an equilibrium price that balances supply and demand for Software and services. The law of demand (also known as the “market-adjusted price”) states that a producer can sell what he wants to produce, and a consumer can buy what he wants. If the manufacturer insists on a higher price, the consumer will buy fewer units. Even if the firm has no competition, the firm is limited by the laws of demand. Market equilibrium is achieved by equating the price of a quantity (corresponding to the quantity requested or delivered) with the demand price or offer price.

Terrizzi, Sabrina, and Chad Meyerhoefer. “Estimates of the price elasticity of switching between branded and generic drugs.” Contemporary Economic Policy 38.1, 2020, pp. 94-108.

Cite this paper

Select style

• Chicago (A-D)
• Chicago (N-B)

BusinessEssay. (2022, December 16). Price Elasticity of Demand. https://business-essay.com/price-elasticity-of-demand/

"Price Elasticity of Demand." BusinessEssay , 16 Dec. 2022, business-essay.com/price-elasticity-of-demand/.

BusinessEssay . (2022) 'Price Elasticity of Demand'. 16 December.

BusinessEssay . 2022. "Price Elasticity of Demand." December 16, 2022. https://business-essay.com/price-elasticity-of-demand/.

1. BusinessEssay . "Price Elasticity of Demand." December 16, 2022. https://business-essay.com/price-elasticity-of-demand/.

Bibliography

BusinessEssay . "Price Elasticity of Demand." December 16, 2022. https://business-essay.com/price-elasticity-of-demand/.

• International Finance: International Monetary System and Balance of Payment
• Cash Flow: Definition and Concepts
• TANF and Medicaid: Review
• Stephen Leacock’s “Wizard of Finance” Review
• Analysis of Airport Governmental Funding
• Chinese Banking System: Profitability, Assets, Equity and Performance Ratios
• Diversifying Funding Sources for Financial Sustainability: Clayton County, Georgia
• Term Structure Models in the Banking Sector
• Voluntary Disclosure: Comparative Qualitative Document Analysis
• Saudi Arabia’s Economy Analysis

Analyzing the Real-World Application of the Elasticity Theory of Demand and Supply and its Impact on Pricing Strategies, Consumer Behavior, and Policy Decisions

10 Pages Posted: 15 May 2023

Kristiana Dela Cruz

World Citi Colleges - Quezon City - Graduate School Department

Jan Celine Hermosura

Florinda vigonte, marmelo v. abante.

Date Written: May 13, 2023

The elasticity theory of demand and supply is a fundamental economic concept that explains how price changes affect the quantity demanded and supplied of a product or service. This paper explores the real-world application of the elasticity theory of demand and supply. Specifically, it examines how different market factors affect the elasticity of demand and supply and how firms and policymakers can use elasticity theory to optimize pricing strategies, increase revenue, and achieve policy objectives. The literature review draws on various secondary sources, including academic journals, business reports, and industry publications. It analyzes the real-world application of the demand and supply elasticity theory across various industries and contexts. The literature review reveals that the elasticity theory of demand and supply is widely applied across various industries, such as healthcare, retail, and transportation. It is utilized by businesses and policymakers to optimize pricing strategies, increase revenue, and achieve policy objectives. Studies analyzing the behaviour of consumers and businesses in response to changes in price through surveys and secondary data analysis emphasize the importance of understanding demand and supply elasticity in making informed business decisions regarding pricing strategies, consumer behaviour, and government policies.

Keywords: Demand, Elasticity Theory, Supply

Suggested Citation: Suggested Citation

Kristiana Dela Cruz (Contact Author)

World citi colleges - quezon city - graduate school department ( email ).

Philippines

Do you have a job opening that you would like to promote on SSRN?

Paper statistics, related ejournals, economics educator: courses, cases & teaching ejournal.

Subscribe to this fee journal for more curated articles on this topic

If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

To log in and use all the features of Khan Academy, please enable JavaScript in your browser.

Unit 3: Elasticity

About this unit.

Why are resold concert tickets so expensive? Why is holiday candy so cheap in January? Learn how supply and demand changes can influences how much things cost, and why the prices of some items can change so dramatically.

Price elasticity of demand

• Introduction to price elasticity of demand (Opens a modal)
• Price elasticity of demand using the midpoint method (Opens a modal)
• More on elasticity of demand (Opens a modal)
• Determinants of price elasticity of demand (Opens a modal)
• Determinants of elasticity example (Opens a modal)
• Perfect inelasticity and perfect elasticity of demand (Opens a modal)
• Constant unit elasticity (Opens a modal)
• Total revenue and elasticity (Opens a modal)
• More on total revenue and elasticity (Opens a modal)
• Elasticity and strange percent changes (Opens a modal)
• Price elasticity of demand and price elasticity of supply (Opens a modal)
• Elasticity in the long run and short run (Opens a modal)
• Elasticity and tax revenue (Opens a modal)
• Price Elasticity of Demand and its Determinants 4 questions Practice
• Determinants of price elasticity and the total revenue rule 4 questions Practice

Price elasticity of supply

• Introduction to price elasticity of supply (Opens a modal)
• Elasticity of supply using a different method (Opens a modal)
• Price elasticity of supply determinants (Opens a modal)
• Price Elasticity of Supply and its Determinants 4 questions Practice

Income elasticity of demand and cross-price elasticity of demand

• Income elasticity of demand (Opens a modal)
• Elasticity in areas other than price (Opens a modal)
• Cross-price elasticity of demand (Opens a modal)
• Lesson Overview - Cross Price Elasticity and Income Elasticity of Demand (Opens a modal)
• Income Elasticity of Demand 4 questions Practice
• Cross-Price Elasticity of Demand 4 questions Practice

We use cookies to enhance our website for you. Proceed if you agree to this policy or learn more about it.

• Essay Database >
• Essay Examples >
• Essays Topics >
• Essay on Demand

Essay On The Price Elasticity Of Supply And Demand

Type of paper: Essay

Topic: Demand , Price , Elasticity , Development , Goods , Business , Market , Products

Words: 1300

Published: 03/30/2023

ORDER PAPER LIKE THIS

Elasticity is a measure of the sensitivity of supply and demand to changes in factors that define them, primarily to a change in the value of the goods. (Mankiw, 2009) In quantitative terms, the elasticity means the degree or measure the response in one variable to the result of a one percent change in another variable value. The most important role in the elasticity of supply and demand plays a varying demand that depends on the prices.

The main factors influencing price elasticity of demand are:

Availability of high-quality interchangeable goods and the price level on them (the more substitutes and the lower the prices are, the more elastic the demand); The proportion of product income of the consumer (the important place occupies a certain product in the budget of the consumer, the higher the elasticity of demand at constant all other terms and conditions); The duration of the period for the exercise of choice (the longer the period of time for making decisions, the more elastic the demand for the product); The type of goods, in particular their division into luxury goods and consumer goods (demand for luxury goods mainly elastic, on commodities is inelastic). The elasticity in the case of price changes shows the change in the demand rate is a price reduction, for example, 1 %. This dependence is expressed by the formula: En = (%DK) * (%DP),where K is the quantity of demand; P — price; %DK % change; %DP is the percentage change in P. (Mankiw, 2009) If the index of prices of consumer goods amounted to 100 at the beginning of the year, and at the end of the year rose to 105, then the percentage change or annual rate of change of inflation will be (5:100) = 0,05 or 5%. Therefore, the demand elasticity depending on price changes will be as follows: Ep = (DK / K) / (DP / P) = (P / K) * (DK / DP) , that equals the change in quantity due to a unit change (DK / DP) multiplied by the ratio of price to quantity (P / K). (Mankiw, 2009)

A simple formula of elasticity, more precisely, the price elasticity is as follows:

Ep = (percentage change in the quantity of goods, which have demand) / (percentage change). (Mankiw, 2009) The percentage change is determined by dividing the change in the price of the original price and the corresponding changes in the quantity of goods for which the percentage change causes a decrease in demand for the number of products which were initially the demand. Therefore, this formula can be written as: Ep = (percentage change in the quantity of goods demanded / percentage change in price) / (change of price / original price). (Mankiw, 2009) Elasticity of demand depending on the growth rates is mainly negative. This means that with rising prices the demand for goods decreases. There are also cross-elasticity of demand, which in the case of significant changes in the price of a single product demonstrates the trend in consumer demand from one product to another. This coefficient of elasticity shows the extent to which changes in the demand for one commodity in interest depending on the changes of the other goods by 1%. The main features of the elasticity of demand for a product is the growth elasticity to it with the growth of its substitutes and the approach of their quality (total consumer costs), or increased possibilities of its use. At the same time reducing the elasticity of demand for goods comes with the increased importance of the needs that meets this item, limited access to it, the duration of the period of existence of the product and so on. Similarly, the measured elasticity of supply — dependent prices percentage change in quantities of items due to a one percent growth rate. Mostly this value of elasticity is positive because a higher price is an incentive for producers to increase the production of goods. A special feature of the market mechanism is that the demand is more elastic than the price for a long, not a short period of time. This is because people don't immediately change their habits in the consumption of goods, as well as the fact that the demand for one commodity may be connected with a supply of another product at consumers, which varies more slowly. Thus, the sharp increase in gasoline prices, though, and reduces the demand for it, but to a lesser extent. At the same time for a long period of time consumers will try to buy small-displacement and fuel-efficient vehicles. Typically, in a competitive consumer market the unit price of a particular product goes on changing until settling at a specific point where the quantity demanded by the end users equals the quantity supplied to the market, resulting in an economic equilibrium (Varian, 2010). The most important factors influencing the elasticity of supply (except price) are the number of producers, expectations (price and others) of economic agents, the value set by the state taxes, the time factor and the like. The relationship between elasticity of supply and demand reveals the law of supply and demand. Its content lies in the interdependence between the amount of goods and services offered by the manufacturer, and the magnitude of demand. This law does not contain the shortcomings of the two previous laws. The law of supply and demand is the law, according to which the supply creates demand through the assortment of produced goods and offered services and their prices, and the demand determines the volume and structure of supply, affecting production. (McEachern, 2009) The price elasticities of demand and supply show how responsive buyers and sellers are to changes in the price of a good. Depending on the magnitude of the coefficient of elasticity there are such main types of elasticity of supply and demand: supply and demand are absolutely elastic; supply and demand are relatively elastic; supply and demand are relatively inelastic; supply and demand are absolutely inelastic. (McEachern, 2009) Absolutely elastic demand is characterized by the fact that the slightest reduction in prices induces the buyer to increase purchases from zero to the limit of their capabilities. Relatively elastic (or elastic) is the demand when small changes in price cause a large (large) changes in the number of sales (for example, reduction of price of 2% causes an increase in demand of 4%). The coefficient of elasticity for this elasticity must be greater than one, and in this example it is equal to two. So, in particular, is the demand for luxury goods. Relatively inelastic demand — the demand when a small change causes an even smaller change in the number of sales. So, with reduced prices by 3%, demand is growing only 1%. The elasticity coefficient in this case is 1/3, that is, for inelastic demand characteristic coefficient less than unity. Thus, for example, is the demand for bread. Among these types of elasticity of demand (elastic and inelastic) is an intermediate situation — a unit elastic demand — when the percentage change in price equals the percentage change in demand (for example, when a price reduction of 1% causes an increase of demand by 1%). Completely inelastic demand is the demand when the price change causes no change in the number of sold products (in particular, the demand for salt). For inelastic demand producers to profitably raise the price of the product, as it causes the growth of its profits. Under conditions of elastic demand the producer is profitable to reduce prices, because it causes the growth of income. Knowledge of the degree of elasticity of demand allows businesses to predict customer behavior and their operations.

Mankiw, N. (2009). Principles of economics (5th ed.). Fort Worth, TX: Dryden Press. McEachern, W. (2009). Economics. Mason, OH: South-Western Cengage Learning. Varian, H. R. (2010). Microeconomic analysis. Mumbai: Viva Books.

Cite this page

Share with friends using:

Removal Request

Finished papers: 736

This paper is created by writer with

ID 250372142

If you want your paper to be:

Well-researched, fact-checked, and accurate

Original, fresh, based on current data

Eloquently written and immaculately formatted

275 words = 1 page double-spaced

Get your papers done by pros!

Other Pages

Example of essay on foreign restrictions on termination, good criminal justice system course work example, good essay on lyric analysis, essay on the memory in decision making, good statement of purpose personal statement example, good commercial math programs research paper example, free civil war and reconstruction essay sample, obesity in united states and texas essay example, drohojowska philip essays examples, good research proposal on hiv and gender, good example of the five stages of human development term paper, ontological argument for the existence of god essays examples, sample essay on mdma and alcohol, good example of tgi fridays marketing mix report, split sentencing research paper, example of essay on what is triangular management how is it related to the contingency approach, good essay about mechanical engineering, free conflict critical thinking example, sample essay on umberson debra and jennifer karas montez social relationships and health a flashpoint for, free essay about ford 2007 10 k, good example of essay on haitis cholera endemic, free medicine essay sample 2, testing the forecasts of the limits to growth essay sample, bargh essays, deadweight essays, coppin essays, cripples essays, browman essays, dispelling essays, dungier essays, blemishes essays, hata essays, goering essays, wounding essays, autopilot essays, tristram essays, isolde essays, photovoltaic effect essays, automotive engineering essays, matt damon essays, retirement pension essays.

Password recovery email has been sent to [email protected]

Use your new password to log in

You are not register!

By clicking Register, you agree to our Terms of Service and that you have read our Privacy Policy .

Now you can download documents directly to your device!

Check your email! An email with your password has already been sent to you! Now you can download documents directly to your device.

or Use the QR code to Save this Paper to Your Phone

The sample is NOT original!

Short on a deadline?

Don't waste time. Get help with 11% off using code - GETWOWED

No, thanks! I'm fine with missing my deadline

• Search Search Please fill out this field.
• Price Elasticity of Demand
• How It Works
• Factors That Affect It

The Bottom Line

• Corporate Finance
• Financial Ratios

Price Elasticity of Demand: Meaning, Types, and Factors That Impact It

• A Practical Guide to Microeconomics
• Economists' Assumptions in their Economic Models
• 5 Nobel Prize-Winning Economic Theories
• Understanding Positive vs. Normative Economics
• What Factors Influence Competition in Microeconomics?
• How Does Government Policy Impact Microeconomics?
• Understanding Microeconomics vs. Macroeconomics
• Differentiate Between Micro and Macro Economics
• Microeconomics vs. Macroeconomics Investments
• Introduction to Supply and Demand
• Is Demand or Supply More Important to the Economy?
• Law of Demand
• Demand Curve
• Law Of Supply
• Supply Curve
• Price Elasticity of Demand CURRENT ARTICLE
• Understanding Elasticity vs. Inelasticity of Demand
• Factors Determining the Demand Elasticity of a Good
• What Factors Influence a Change in Demand Elasticity?
• What Is the Concept of Utility in Microeconomics?
• What Is the Utility Function and How Is it Calculated?
• Total Utility
• Marginal Utility
• Law Of Diminishing Marginal
• What Does the Law of Diminishing Marginal Utility Explain?
• Economic Equilibrium
• Income Effect
• Indifference Curve
• Consumer Surplus
• Comparative Advantage
• Economies of Scale
• Perfect Competition
• Invisible Hand
• Market Failure

What Is Price Elasticity of Demand?

Price elasticity of demand is a measurement of the change in the demand for a product in relation to a change in its price. Elastic demand is when the change in demand is large when there is a change in price. Inelastic demand is when the change in demand is small when there is a change in price.

Key Takeaways

• Price elasticity of demand is a measurement of the change in consumption of a product in relation to a change in its price.
• A good is perfectly elastic if the price elasticity is infinite (if demand changes substantially even with minimal price change).
• If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic.
• If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.
• If price elasticity is exactly 1 (price change leads to an equal percentage change in demand), it is known as unitary elasticity.
• The availability of a substitute for a product affects its elasticity. If there are no good substitutes and the product is necessary, demand won’t change when the price goes up, making it inelastic.

Theresa Chiechi / Investopedia

Understanding Price Elasticity of Demand

Economists have found that the prices of some goods are very inelastic . That is, a reduction in price does not increase demand much, and an increase in price does not hurt demand, either. For example, gasoline has little price elasticity of demand. Drivers will continue to buy as much as they have to, as will airlines, the trucking industry, and nearly every other buyer.

Other goods are much more elastic , so price changes for these goods cause substantial changes in their demand or their supply.

Not surprisingly, this concept is of great interest to marketing professionals. It could even be said that their purpose is to create inelastic demand for the products that they market. They achieve that by identifying a meaningful difference in their products from any others that are available.

If the quantity demanded of a product changes greatly in response to changes in its price, it is elastic. That is, the demand point for the product is stretched far from its prior point. If the quantity purchased shows a small change after a change in its price, it is inelastic. The quantity didn’t stretch much from its prior point. 

Price elasticity of demand expressed mathematically is as follows:

Price Elasticity of Demand = Percentage Change in Quantity Demanded ÷ Percentage Change in Price

Factors That Affect Price Elasticity of Demand

Availability of substitutes.

The more easily a shopper can substitute one product for another, the more the price will fall. For example, in a world in which people like coffee and tea equally, if the price of coffee goes up, people will have no problem switching to tea, and the demand for coffee will fall. This is because coffee and tea are considered good substitutes for each other.

The more discretionary a purchase is, the more its quantity of demand will fall in response to price increases. That is, the product demand has greater elasticity.

Say you are considering buying a new washing machine, but the current one still works; it’s just old and outdated. If the price of a new washing machine goes up, you’re likely to forgo that immediate purchase and wait until prices go down or the current machine breaks down.

The less discretionary a product is, the less its quantity demanded will fall. Inelastic examples include luxury items that people buy for their brand names. Addictive products are quite inelastic, as are required add-on products, such as inkjet printer cartridges.

One thing all these products have in common is that they lack good substitutes. If you really want an Apple iPad, then a Kindle Fire won’t do. Addicts are not dissuaded by higher prices, and only HP ink will work in HP printers (unless you disable HP cartridge protection).

Duration of Price Change

The length of time that the price change lasts also matters. Demand response to price fluctuations is different for a one-day sale than for a price change that lasts for a season or a year.

Clarity of time sensitivity is vital to understanding the price elasticity of demand and for comparing it with different products. Consumers may accept a seasonal price fluctuation rather than change their habits.

Types of Price Elasticity of Demand

Price elasticity of demand can be categorized according to the number calculated by dividing the percentage change in quantity demanded by the percentage change in price. These categories include the following:

Example of Price Elasticity of Demand

As a rule of thumb, if the quantity of a product demanded or purchased changes more than the price changes, then the product is considered to be elastic (for example, the price goes up by 5%, but the demand falls by 10%).

If the change in quantity purchased is the same as the price change (say, 10% ÷ 10% = 1), then the product is said to have unit (or unitary) price elasticity .

Finally, if the quantity purchased changes less than the price (say, -5% demanded for a +10% change in price), then the product is deemed inelastic.

To calculate the elasticity of demand, consider this example: Suppose that the price of apples falls by 6% from $1.99 a bushel to $1.87 a bushel. In response, grocery shoppers increase their apple purchases by 20%. The elasticity of apples is thus: 0.20 ÷ 0.06 = 3.33. The demand for apples is quite elastic.

What Makes a Product Elastic?

If a price change for a product causes a substantial change in either its supply or its demand, it is considered elastic. Generally, it means that there are acceptable substitutes for the product. Examples would be cookies, luxury automobiles, and coffee.

What Makes a Product Inelastic?

If a price change for a product doesn’t lead to much, if any, change in its supply or demand, it is considered inelastic. Generally, it means that the product is considered to be a necessity or a luxury item for addictive constituents. Examples would be gasoline, milk, and iPhones.

What Is the Importance of Price Elasticity of Demand?

Knowing the price elasticity of demand for goods allows someone selling that good to make informed decisions about pricing strategies . This metric provides sellers with information about consumer pricing sensitivity. It is also key for makers of goods to determine manufacturing plans, as well as for governments to assess how to impose taxes on goods.

Price elasticity of demand is the ratio of the percentage change in quantity demanded of a product to the percentage change in price. Economists employ it to understand how supply and demand change when a product’s price changes.

• Terms of Service
• Editorial Policy
• Privacy Policy

Introduction to Elasticity

Chapter objectives.

In this chapter, you will learn about:

• Price Elasticity of Demand and Price Elasticity of Supply
• Polar Cases of Elasticity and Constant Elasticity
• Elasticity and Pricing
• Elasticity in Areas Other Than Price

Bring It Home

That will be how much.

Imagine going to your favorite coffee shop and having the waiter inform you the pricing has changed. Instead of $3 for a cup of coffee, you will now be charged $2 for coffee, $1 for creamer, and $1 for your choice of sweetener. If you pay your usual $3 for a cup of coffee, you must choose between creamer and sweetener. If you want both, you now face an extra charge of $1. Sound absurd? Well, that is similar to the situation Netflix customers found themselves in—they faced a 60% price hike to retain the same service in 2011.

In early 2011, Netflix consumers paid about $10 a month for a package consisting of streaming video and DVD rentals. In July 2011, the company announced a packaging change. Customers wishing to retain both streaming video and DVD rental would be charged $15.98 per month, a price increase of about 60%. In 2014, Netflix also raised its streaming video subscription price from $7.99 to $8.99 per month for new U.S. customers. The company also changed its policy of 4K streaming content from $9.00 to $12.00 per month that year.

How would customers of the 18-year-old firm react? Would they abandon Netflix? Would the ease of access to other venues make a difference in how consumers responded to the Netflix price change? We will explore the answers to those questions in this chapter, which focuses on the change in quantity with respect to a change in price, a concept economists call elasticity.

Anyone who has studied economics knows the law of demand: a higher price will lead to a lower quantity demanded. What you may not know is how much lower the quantity demanded will be. Similarly, the law of supply states that a higher price will lead to a higher quantity supplied. The question is: How much higher? This chapter will explain how to answer these questions and why they are critically important in the real world.

To find answers to these questions, we need to understand the concept of elasticity. Elasticity is an economics concept that measures responsiveness of one variable to changes in another variable. Suppose you drop two items from a second-floor balcony. The first item is a tennis ball. The second item is a brick. Which will bounce higher? Obviously, the tennis ball. We would say that the tennis ball has greater elasticity.

Consider an economic example. Cigarette taxes are an example of a “sin tax,” a tax on something that is bad for you, like alcohol. Governments tax cigarettes at the state and national levels. State taxes range from a low of 17 cents per pack in Missouri to $4.35 per pack in New York. The average state cigarette tax is $1.69 per pack. The 2014 federal tax rate on cigarettes was $1.01 per pack, but in 2015 the Obama Administration proposed raising the federal tax nearly a dollar to $1.95 per pack. The key question is: How much would cigarette purchases decline?

Taxes on cigarettes serve two purposes: to raise tax revenue for government and to discourage cigarette consumption. However, if a higher cigarette tax discourages consumption considerably, meaning a greatly reduced quantity of cigarette sales, then the cigarette tax on each pack will not raise much revenue for the government. Alternatively, a higher cigarette tax that does not discourage consumption by much will actually raise more tax revenue for the government. Thus, when a government agency tries to calculate the effects of altering its cigarette tax, it must analyze how much the tax affects the quantity of cigarettes consumed. This issue reaches beyond governments and taxes. Every firm faces a similar issue. When a firm considers raising the sales price, it must consider how much a price increase will reduce the quantity demanded of what it sells. Conversely, when a firm puts its products on sale, it must expect (or hope) that the lower price will lead to a significantly higher quantity demanded.

As an Amazon Associate we earn from qualifying purchases.

This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/principles-economics-2e/pages/1-introduction

• Authors: Steven A. Greenlaw, David Shapiro
• Publisher/website: OpenStax
• Book title: Principles of Economics 2e
• Publication date: Oct 11, 2017
• Location: Houston, Texas
• Book URL: https://openstax.org/books/principles-economics-2e/pages/1-introduction
• Section URL: https://openstax.org/books/principles-economics-2e/pages/5-introduction-to-elasticity

© Jun 15, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.

Free Samples and Examples of Essays, Homeworks and any Papers

• Absolutely free
• Perfect homeworks
• Fast relevant search
• No registration and Anonymous

Price Elasticity of Supply – Essay

Filed Under: Essays Tagged With: Economics

Price Elasticity of Supply |

In this chapter we consider elasticity of supply. Students should understand how to calculate elasticity of supply and understand some of the factors that influence the elasticity of supply for different products.Definition of price elasticity of supplyPrice elasticity of supply measures the relationship between change in quantity supplied and a change in price.

If supply is elastic, producers can increase output without a rise in cost or a time delay

If supply is inelastic, firms find it hard to change production in a given time period.The formula for price elasticity of supply is:Percentage change in quantity supplied divided by the percentage change in price * When Pes > 1, then supply is price elastic * When Pes < 1, then supply is price inelastic * When Pes = 0, supply is perfectly inelastic * When Pes = infinity, supply is perfectly elastic following a change in demandFactors that Affect Price Elasticity of Supply(1) Spare production capacityIf there is plenty of spare capacity then a business should be able to increase its output without a rise in costs and therefore supply will be elastic in response to a change in demand. The supply of goods and services is often most elastic in a recession, when there is plenty of spare labour and capital resources available to step up output as the economy recovers.(2) Stocks of finished products and componentsIf stocks of raw materials and finished products are at a high level then a firm is able to respond to a change in demand quickly by supplying these stocks onto the market – supply will be elastic. Conversely when stocks are low, dwindling supplies force prices higher and unless stocks can be replenished, supply will be inelastic in response to a change in demand.(3) The ease and cost of factor substitutionIf both capital and labour resources are occupationally mobile then the elasticity of supply for a product is higher than if capital and labour cannot easily and quickly be switched(4) Time period involved in the production processSupply is more price elastic the longer the time period that a firm is allowed to adjust its production levels. In some agricultural markets for example, the momentary supply is fixed and is determined mainly by planting decisions made months before, and also climatic conditions, which affect the overall production yield. An empty restaurant – plenty of spare capacity to meet any rise in demand! | When telecommunications networks get congested at peak times, the elasticity of supply to meet rising demand may be low |

The Essay on Price elasticity of demand (PED)

In other words, it is percentage change in quantity demanded by the percentage change in price of the same commodity. In economics and business studies, the price elasticity of demand is a measure of the sensitivity of quantity demanded to changes in price. It is measured as elasticity, that is, it measures the relationship as the ratio of percentage changes between quantity demanded of a good and ...

Stocks in a warehouse – businesses with plentiful stocks can supply quickly and easily onto the market when demand changes | For many agricultural products there are time lags in the production process which means that elasticity of supply is very low in the immediate or momentary time period |

 Supply curves with different price elasticity of supply The non-linear supply curveA non linear supply curve has a changing price elasticity of supply throughout its length. This is illustrated in the diagram below.Useful applications of price elasticity of demand and supplyElasticity of demand and supply is tested in virtually every area of the AS economics syllabus. The key is to understand the various factors that determine the responsiveness of consumers and producers to changes in price. The elasticity will affect the ways in which price and output will change in a market. And elasticity is also significant in determining some of the effects of changes in government policy when the state chooses to intervene in the price mechanism.Some relevant issues that directly use elasticity of demand and supply include: * Taxation: The effects of indirect taxes and subsidies on the level of demand and output in a market e.g. the effectiveness of the congestion charge in reducing road congestion; or the impact of higher duties on cigarettes on the demand for tobacco and associated externality effects * Changes in the exchange rate: The impact of changes in the exchange rate on the demand for exports and imports * Exploiting monopoly power in a market: The extent to which a firm or firms with monopoly power can raise prices in markets to extract consumer surplus and turn it into extra profit (producer surplus) * Government intervention in the market: The effects of the government introducing a minimum price (price floor) or maximum price (price ceiling) into a marketElasticity of demand and supply also affects the operation of the price mechanism as a means of rationing scarce goods and services among competing uses and in determining how producers respond to the incentive of a higher market price. | |

The Essay on Price, Income and Cross Elasticity of Demand

Explain what is meant by the terms price elasticity, income elasticity and cross elasticity of demand and discuss the main determinants of each of these. Discuss the importance of each of these to the decision making process within a typical business. Elasticity is the responsiveness to which one variable responds to a change in another variable Price elasticity of demand (PED) measures the ...

Similar Papers

The importance for price elasticity of demand.

... production of the good. The Price Elasticity of Demand justifies the nationalization of public utility services, e.g. bus or train services, electricity, water supply ... want to monopolize, or control, the market. Therefore, in the government’s interest ...

Price elasticity of demand (PED)

... nature of demand, if the price increases, less is demanded, and thus quantity change is negative, leading to a negative price elasticity of demand. Conversely, if price falls, ...

Price Elasticity of Demand of Newspapers

... calculate the price elasticity of demand we’ll divide the percentage change in the quantity demanded by the percentage change in price. The percentage change in quantity demanded would be ...

Price Elasticity Of Demand 2

... when supply and demand balances, there will be no change in price. The price which makes the supply and demand to balance is referred as market price or equilibrium price. ...

The Price Elasticity of Demand of Bordeaux Wine

... supports the notion that the demand for Bordeaux Wine is price elastic. The Price Elasticity of Demand for Bordeaux wine is ... change in terms of different national markets. The main markets that represent the biggest changes in demand over this time ...

Price Elasticity Of Demand

... social smokers are considered elastic. When a price change results in little or no change in the level of supply or demand, the good is inelastic. ...

• Essentials of Supply, Demand, and Market Prices

Fundamentals of Supply and Demand: How Markets Determine Prices

In the realm of microeconomics, understanding the dynamics of supply and demand is fundamental to comprehending how markets operate and how prices are determined. Whether you're a student grappling with economics assignments or a curious mind delving into market mechanisms, this blog aims to demystify these concepts and their practical implications. This guide will provide valuable help with your supply and demand assignment , ensuring you gain a thorough understanding of these crucial economic principles and their real-world applications.

Elasticity measures the responsiveness of quantity demanded or supplied to price changes, crucial for understanding market dynamics and policy impacts like taxes or subsidies. Efficient markets maximize consumer and producer surplus, ensuring resources are allocated optimally. Internationally, trade benefits from comparative advantage, allowing countries to specialize and expand market access, though policies like tariffs can distort these benefits.

These principles not only explain price formation and allocation efficiency but also underpin decision-making in economics, guiding policies that affect individuals, businesses, and global economies.

1. Supply and Demand: Foundation of Market Dynamics

How supply and demand interact is fundamental to grasping market operations. Supply refers to the quantity of goods or services producers are willing to provide at various prices, while demand denotes the quantity consumers are willing to purchase at different price levels. This interplay determines market equilibrium, where supply meets demand, establishing the equilibrium price and quantity.

Supply and demand are the bedrock principles of market economics. Supply refers to the quantity of goods or services that producers are willing and able to offer at various prices. Demand, on the other hand, represents the quantity of a good or service that consumers are willing to purchase at different price levels. The interaction between supply and demand determines market equilibrium, where the quantity supplied equals the quantity demanded, establishing the equilibrium price.

This price reflects the optimal allocation of resources, ensuring efficiency in the market. Understanding supply and demand dynamics is essential for analyzing how prices are set, how markets respond to changes, and how economic policies impact consumer choices and producer decisions.

Supply and demand form the bedrock of market dynamics, dictating prices and quantities exchanged in economies worldwide. In microeconomics, understanding these forces is crucial for analyzing market behaviors and assigning resources efficiently. The equilibrium point, where supply meets demand, determines optimal prices and quantities, depicted by intersecting supply and demand curves. Changes in factors like consumer preferences, production costs, or government policies can shift these curves, impacting market outcomes. Elasticity measures the responsiveness of buyers and sellers to price changes, influencing consumer behavior and producer decisions.

2. Elasticity: Measuring Responsiveness in Markets

Elasticity measures how sensitive consumers or producers are to changes in price or other factors. Elastic demand or supply indicates significant changes in quantity demanded or supplied in response to price fluctuations. In contrast, inelastic demand or supply reflects less sensitivity to price changes. Understanding elasticity helps predict market responses and assesses the impacts of policies such as taxes, subsidies, or regulations.

Elasticity: Measuring Responsiveness in Markets" explores how elasticity quantifies the sensitivity of buyers and sellers to changes in price or income within economic markets. This concept plays a crucial role in economic assignments, helping to predict consumer behavior and producer responses to price fluctuations. For instance, goods with elastic demand exhibit significant changes in quantity demanded relative to price shifts, while goods with inelastic demand show less variability.

Elasticity aids in making informed decisions regarding pricing strategies, market analysis, and policy formulation. Whether analyzing supply and demand dynamics or evaluating the impacts of government interventions, grasping elasticity provides a foundational understanding for tackling economic assignments effectively.

Market Efficiency and Welfare: Consumer and Producer Surplus

Efficient markets maximize welfare by achieving an optimal allocation of resources. Consumer surplus represents the benefit consumers gain when purchasing goods or services below their maximum willingness to pay. Producer surplus, on the other hand, reflects the benefit producers receive by selling at prices higher than their minimum acceptable price. Together, these surpluses contribute to overall market efficiency, signaling a well-functioning economy.

Market efficiency is achieved when resources are allocated optimally, maximizing total welfare. Consumer surplus denotes the difference between what consumers are willing to pay and what they actually pay for a good or service, reflecting their benefit from transactions. Producer surplus, conversely, represents the difference between the price producers receive and their minimum acceptable price, indicating their gain.

Together, consumer and producer surpluses contribute to overall market efficiency by ensuring that goods and services are produced and consumed where they generate the highest value. Efficient markets not only enhance consumer welfare by offering goods at competitive prices but also enable producers to earn profits, fostering economic growth and stability. Understanding these concepts helps policymakers evaluate market interventions and regulatory measures to promote efficiency and improve societal welfare.

4. International Trade: Benefits and Policy Considerations

International trade allows countries to specialize in producing goods or services where they have a comparative advantage, enhancing economic efficiency and expanding consumer choices. However, trade policies such as tariffs and quotas aim to protect domestic industries but can lead to unintended consequences. Understanding these policies and their impacts on global trade dynamics is crucial for analyzing trade-offs between protectionism and economic openness.

International trade allows countries to specialize in producing goods or services where they have a comparative advantage, maximizing global efficiency and benefiting consumers with a broader range of products at lower prices. It promotes economic growth by fostering competition, innovation, and economies of scale.

Benefits of International Trade

• Comparative Advantage: Countries can focus on producing goods and services they can produce more efficiently, leading to lower prices and increased output diversity.
• Consumer Benefits: Access to a wider variety of goods and services from around the world allows consumers to benefit from lower prices, higher quality, and innovation.
• Economic Growth: Trade stimulates economic growth by allowing countries to specialize, increase productivity, and exploit economies of scale.

Policy Considerations

• Trade Barriers: Tariffs and quotas protect domestic industries but can increase prices for consumers and reduce economic efficiency.
• Free Trade Agreements: Bilateral or multilateral agreements can reduce trade barriers and promote economic integration and stability.
• Globalization Impact: Global trade integration raises concerns about income inequality, labor standards, and environmental sustainability, necessitating balanced policy frameworks.

These benefits and policy considerations is crucial for policymakers and businesses to navigate the complexities of international trade and ensure its benefits are maximized while mitigating potential downsides.

These four sections provide a comprehensive overview of supply and demand fundamentals, elasticity, market efficiency, and international trade in microeconomics. By exploring these concepts, students and practitioners alike can gain deeper insights into how markets function, determine prices, and allocate resources efficiently, while also understanding the implications of economic policies on both domestic and international scales.

By fostering fair and transparent trade practices while addressing socio-economic challenges, countries can harness the full potential of international trade to foster sustainable development and prosperity on a global scale.

Post a comment...

Essentials of supply, demand, and market prices submit your assignment, attached files.

Learn new skills, connect in real time, and grow your career in the Salesblazer Community.

The Ultimate Guide to Price Elasticity of Demand

Learn how to ride the waves of changing consumer behavior and markets to boost profit.

Peter Strohkorb

Share article.

“The price of gas is up. No, wait, it’s down again.”

“I need to get my hands on the newest cell phone. Sure, it costs more than my rent, but check out the new camera.”

“Our electric bill went up. I guess we’ll cut back on takeout this month.”

Do these sound like comments you’ve made or heard — comments that leave you feeling as if you’re riding a rollercoaster? Then you’re already familiar with the price elasticity of demand.

Price elasticity of demand is how businesses know where to set the price for what they sell. It sounds complicated, but it’s a basic economic principle with a simple formula to follow. And once you understand it, you have access to untapped profits and higher customer satisfaction.

Strap in. Buckle up. We’re going to ride the ups and downs of price elasticity and explore how it drives successful pricing strategies and revenue forecasts.

What you’ll learn:

What is price elasticity, price elasticity of demand vs. price elasticity of supply, why is price elasticity of demand important, 3 different types of price elasticity.

• What affects price ela sticity of demand

How to calculate and measure price elasticity (with formula)

• What is cross-price elasticity of demand

How to manage price elasticity

Get a full visual of your business in an instant.

Get complete visibility of your pipeline, forecast, and team — with Revenue Intelligence from Sales Cloud.  

Price elasticity measures your product or service’s supply-and-demand responsiveness to changes in its price. You use a formula that calculates the percentage change in the quantity demanded or supplied. You finish up by dividing the percentage change in price. The result shows a correlation between your price change and the quantity you sold. If you raised prices, did your customers buy more or less? Did you have to increase supplies because the new low prices spurred massive demand?

( Back to top )

You can measure price elasticity of demand (PED) or price elasticity of supply (PES). We’ll go over the differences between PES and PED in more detail later. In the meantime, here’s a glance at the formula:

PED = [percent change in quantity (of goods or services bought)] / [percent change in price]

PES = [percent change of supply (of goods or services produced)] / [percent change in price]

Price elasticity of supply measures how quickly the production of a product or service can ramp up when there is a price change. Let’s say you really want to buy a new cell phone on the market. The phone manufacturer announces a big sale. You, along with a million other people, rush to order.

The manufacturer can’t keep up with the demand. Supplies run short.

Suddenly, they are out of stock. You find yourself on a waitlist.

That’s price elasticity of supply.

On the flip side, price elasticity of demand predicts if a price increase will affect how many of your customers continue purchasing from you. Imagine you’re selling ice cream on a hot beach. If you raise the price, will your sales plummet — or will sunbathers still line up, cash in hand? The price sensitivity and customer response are what price elasticity for PED and PES seek to understand and quantify.

The idea that something is elastic implies that something can be inelastic or insensitive to price increases. Before we discuss the importance of price elasticity, let’s break down the seller’s options.

Understanding price elasticity is not just about setting prices, it’s about unlocking potential. It guides your pricing strategies to create revenue without alienating your customers. PED helps with sales forecasting . You won’t be caught off guard by a sudden dip in demand because you adjusted your prices. You’ll ride the highs of an accurate financial plan that can boost profitability . PED helps identify who in your target market may respond differently to price changes. You can then decide to change marketing strategies or increase sales efforts. This helps businesses make informed decisions by:

• Setting optimal prices: Businesses can use elasticity to figure out the price that maximizes their profits. For example, if they know demand is elastic (meaning a small price increase leads to a big drop in sales), they might keep prices lower to attract more customers.
• Planning for promotions and discounts: Knowing elasticity helps businesses decide if a sale will actually boost sales or reduce their profit margin. If demand is inelastic (meaning price changes don’t affect sales much), a sale might not be worthwhile.
• Developing product strategies: Elasticity can help businesses understand how much customers value a product’s features. If a key feature has inelastic demand (people will buy it regardless of a price increase for that feature), the business might focus on emphasizing that feature.
• Understanding customer behavior: Elasticity predicts how customers will react to price changes. This can be crucial for planning marketing campaigns, aligning your sales funnel , and budgeting.

Price elasticity of demand lets you determine how much you can increase prices without losing too many customers. In preparation for the upcoming summer season, your beachfront ice cream shop reviews last year’s sales. The report indicates a consistent demand even though you raised prices by 2%. You decide to run a test and see if your target market is willing to pay an extra 5%. You add the 5% and generate additional revenue without turning away too many customers.

You can create a marketing plan that targets customers who are willing to pay a premium for your desserts during the summer season. This can include targeted advertising, promotions, and other strategies to increase sales and drive growth .

It could be said that the ultimate goal for a business is to achieve inelasticity: No matter the price change, demand stays the same. However, certain factors determine the inelasticity or price elasticity of demand for your product or service.

Get the latest articles in your inbox.

360 Highlights

Yes, I would like to receive the Salesforce 360 Highlights newsletter as well as marketing emails regarding Salesforce products, services, and events. I can unsubscribe at any time.

By registering, you confirm that you agree to the processing of your personal data by Salesforce as described in the Privacy Statement .

Thanks, you’re subscribed!

Using the ice cream example, if you increase the price, you might find that your customers aren’t as eager to buy your treats and sales die down. But if you lower your prices, you have a line of customers stretching down the beach.

Got enough ice cream to support the demand?

1. Elastic price

In this case, your price increase directly affects the demand for your product. You added a dollar to your ice cream prices, and now customers are going elsewhere.

2. Unit elastic price

This is a direct correlation to the supply and demand of your product or service. For example, you raise prices by 25% and then see a 25% decrease in the quantity sold. Non-essential consumer products often witness this event. Let’s think about that ice cream again. You decide to raise the price of vanilla by 25%. Now, the demand for vanilla has fallen by 25%.

What’s the difference between unit elastic and elastic? Unit elasticity is a one-to-one ratio. Increase the price by 25%, and you see a 25% change in demand. In contrast, simple elasticity doesn’t carry as much of a direct correlation.

3. Inelastic price

If you increase your prices, the demand for your product or service stays relatively the same. A good example of this would be certain prescription drugs. If they can, patients will continue to buy their medications for the sake of their health. Additionally, other essential products such as rent and utility bills fall into this category.

What affects price elasticity of demand?

Let’s take a look at the factors at play.

Essential vs. non-essential purchases

There are some generic options for certain medications that might offer a lower price than the brand-name drugs. However, once a person finds a drug that works well for them, the chances of them switching are relatively low due to things such as side effects and the time it takes for your body to get used to the new drug. Also, there are limited options for competition in the pharmaceutical industry.

If your product or service is non-essential (for example, ice cream and many home electronics), your customers will feel less obligated to buy and may try to find something at the price they want to pay.

Stiff competition

Are there limited substitution options for your product? Or can customers find a variety of sellers that provide similar goods and services? When we think about ice cream, I can go to any number of diners, shops, or even my local grocery store to get my favorite scoop. If something is non-essential, and competition is plentiful, then you need to pay attention to price elasticity.

Market trends and limited sales offers

How long a product or service is priced at a certain amount will impact demand. The longer the price change lasts, the more likely people are to find ways to adapt to it, potentially leading to a bigger impact on demand.

If the price change is short-term, people might not have time to find alternatives. Then they might not be as likely to cut back on buying the item (less elastic demand). If the price change is long term, consumers have time to adjust their habits. They might switch to cheaper options or cut back on buying the item altogether (more elastic demand).

Think about a surprise one-day sale. You might be caught off guard and then adjust. You grab a discounted item you like, but this won’t change your shopping habits. A more permanent price increase gives you more time to prepare. You might find alternatives or adjust your budget.

Consumer income to product cost

If your product’s price takes a large chunk out of your customer’s wallet, then even the slightest increase could have immediate effects on your demand. By the same token, if your prices are a smaller nibble on the customer’s income, then a price change will have less impact.

We see this with high ticket ERP (enterprise resource planning) software. ERP systems that act as a centralized data hub for all the departments within an organization can carry a hefty subscription price tag. So, when the ERP subscription increases, businesses need to have a serious conversation about whether to continue with their current provider or go with a competitor.

Keep all these factors in mind when setting or adjusting the price of a product or service. First, tap into what your target audience needs and what they consider urgent or essential. Then, prepare to adjust accordingly so you meet their demand. After you consider all the possible scenarios that could impact your price elasticity of demand, it’s time to categorize your products or services.

As I mentioned earlier, the formula for price elasticity is:

[Percent change in quantity (of goods or services bought)] / [percent change in price]

After you run your calculations, you will be left with either a value greater than one, a value equal to one, or a value less than one.

Greater than one (a positive number) : Implies your product or service is elastic. When you change your price, you will see a significant proportional change in your supply or demand.

A value equal to one (the number one): Means you have achieved unit elasticity. When you change your prices, they will be equal to your change in supply and demand.

Less than one (a negative number): Shows that your product or service is inelastic, and any price changes will be relatively small in proportion to the change of your supply or demand.

Let’s plug in real numbers.

PED formula in action

Your ice cream shop sold 150 cones at $1.00 each yesterday. You decide to raise prices by 75% making the new price $1.75 per cone. Today, you only sold 125 cones.

Formula for PED = % change in quantity / % change in price

Step 1: Find the percent change in quantity

(New quantity – original quantity) / (New quantity + original quantity) / 2

(125 – 150) / (125 + 150) / 2 = -.045 (-4.5%)

Step 2: Find the percent change in price

(New price – original price) / (New price + original price) / 2

(1.75 – 1.00) / (1.75 + 1.00) / 2 = .136 (13.6%)

Step 3: Use PED formula

% change in quantity / % change in price = PED

-4.5% / 13.6% = -.33

The negative number indicates that your demand for ice cream is relatively inelastic. Even math and economics can feel like a rollercoaster. Before we move on to price elasticity of demand’s counterpart — price elasticity of supply — let’s go through one more calculation and a slightly new formula: cross-price elasticity.

What is cross-price elasticity of demand?

Cross-price elasticity is how much consumers switch between products or services depending on price changes. The more your consumers switch, the more elastic the cross-price elasticity.

The formula for cross-price elasticity is:

(% change in quantity demanded for X product or service) / (% change in price for Y product or service)

You’re at the grocery store and see your favorite bag of chips (Product Y) increased its price by 30%. You decide to switch to a competitor chip (Product X) and buy three bags priced at $2.00 each.

Step 1: Calculate percentage changes

Let’s assume you normally buy 1 bag of Product Y chips.

[(New quantity – original quantity) / original quantity] x 100%

[(3 bags – 1 bag) / (1 bag) x 100% = 200% increase

Step 2: Apply the cross-price formula

(200% change in Product X) / (30% change in Product Y) = 6.66

The result from this formula (a positive number) shows that product X is considered a “substitute good.” The term “substitute good” is an economic principle that means consumers view a competitor’s product or service as similar enough to your product or service.

If chip prices across the board increased and the number of bags sold went down, that principle is called “complementary goods.”

Now that the math lesson is over, let’s wrap up with the difference between price elasticity of demand and price elasticity of supply.

Join the Salesblazer movement

We’re building the largest and most successful community of sales professionals, so you can learn, connect, and grow. 

If you made it this far, congratulations. That was a ton of formulas, definitions, and economic theories to process. Now, how do you apply everything you learned?

Use price elasticity and the formulas to explore strategic pricing models and product differentiation. I recommend A/B testing product and service prices.

Example: A streaming service wants to determine the price elasticity of their monthly subscription fee. They would run an A/B test using a control group.

Group A (the control group) keeps the standard monthly price — $10

Group B (the test group) sets a slightly higher price — $12

The company sets a test period and tracks how many people in each group sign up for their service.

If the signup for Group B is significantly lower compared to Group A, it suggests some degree of elastic demand. Now the subscription service knows their customers might be price-sensitive and could choose other streaming services if the price increases. They can use this information to conduct competitor and market research, or even hold focus groups to figure out the maximum price they can charge.

You can adjust the prices based on the results you are seeing weekly, quarterly, or yearly. Be sure to make accurate calculations and keep track of all metrics.

Price elasticity: untapped potential awaits

We are rounding the final corner of our economics rollercoaster ride. Is that a dip ahead or a massive drop? Mastering the concept of price elasticity of demand allows businesses not just to react to the market, but to anticipate and shape consumer behavior. The standard formula makes the price elasticity of demand easy to calculate. You are now well-equipped to choose the right pricing strategy and forecast with more accuracy.

Get pipeline intel you can act on in any scenario

See how Revenue Intelligence helps you model the impact of adding or removing deals to make your forecast.

Just For You

How to Use Lead Nurturing to Take Your Sales Career to the Next Level

What Is Social Selling and How Does It Work?

Explore related content by topic

• Sales Leader
• Sales Representative
• Sales Operations
• Salesblazer

Peter Strohkorb has 20+ years of experience in sales and marketing leadership roles in multinational corporations like Sony, Canon, 3M, CSC and Dell. He is founder and CEO of Peter Strohkorb Advisory in Sydney, Australia.

Personal Selling: How To Build Better Customer Relationships and Close More Deals

Sales Strategy Guide: 6 Steps to More Efficient Selling

Sales Coaching: 10 Straightforward Tips That Work

What Is SPIN Selling? A Way to Build Trust With Your Customers

What Is a Unique Selling Proposition (USP) and How Do You Craft One That Works?

What Is a QBR? (And How to Plan One Your Customers Will Appreciate)

What Is a Sales Engineer, and What Do They Do?

What Is Sales Turnover and How Does it Help With Smarter Inventory Management?

New to Salesforce?

• What is Salesforce?
• Best CRM software
• Explore all products
• What is cloud computing
• Customer success
• Product pricing

About Salesforce

• Salesforce.org
• Sustainability

Popular Links

• Salesforce Mobile
• AppExchange
• CRM software
• Salesforce LIVE
• Salesforce for startups
• América Latina (Español)
• Brasil (Português)
• Canada (English)
• Canada (Français)
• United States (English)

Europe, Middle East, and Africa

• España (Español)
• Deutschland (Deutsch)
• France (Français)
• Italia (Italiano)
• Nederland (Nederlands)
• Sverige (Svenska)
• United Kingdom (English)
• All other countries (English)

Asia Pacific

• Australia (English)
• India (English)
• Malaysia (English)
• ประเทศไทย (ไทย)

© Copyright 2024 Salesforce, Inc. All rights reserved.  Various trademarks held by their respective owners. Salesforce, Inc. Salesforce Tower, 415 Mission Street, 3rd Floor, San Francisco, CA 94105, United States

Information

• Author Services

Initiatives

You are accessing a machine-readable page. In order to be human-readable, please install an RSS reader.

All articles published by MDPI are made immediately available worldwide under an open access license. No special permission is required to reuse all or part of the article published by MDPI, including figures and tables. For articles published under an open access Creative Common CC BY license, any part of the article may be reused without permission provided that the original article is clearly cited. For more information, please refer to https://www.mdpi.com/openaccess .

Feature papers represent the most advanced research with significant potential for high impact in the field. A Feature Paper should be a substantial original Article that involves several techniques or approaches, provides an outlook for future research directions and describes possible research applications.

Feature papers are submitted upon individual invitation or recommendation by the scientific editors and must receive positive feedback from the reviewers.

Editor’s Choice articles are based on recommendations by the scientific editors of MDPI journals from around the world. Editors select a small number of articles recently published in the journal that they believe will be particularly interesting to readers, or important in the respective research area. The aim is to provide a snapshot of some of the most exciting work published in the various research areas of the journal.

Original Submission Date Received: .

• Active Journals
• Find a Journal
• Proceedings Series
• For Authors
• For Reviewers
• For Editors
• For Librarians
• For Publishers
• For Societies
• For Conference Organizers
• Open Access Policy
• Institutional Open Access Program
• Special Issues Guidelines
• Editorial Process
• Research and Publication Ethics
• Article Processing Charges
• Testimonials
• Preprints.org
• SciProfiles
• Encyclopedia

Article Menu

• Subscribe SciFeed
• Recommended Articles
• Google Scholar
• on Google Scholar
• Table of Contents

Find support for a specific problem in the support section of our website.

Please let us know what you think of our products and services.

Visit our dedicated information section to learn more about MDPI.

JSmol Viewer

Uncovering the research hotspots in supply chain risk management from 2004 to 2023: a bibliometric analysis.

1. Introduction

2.1. data collection and statistics, 2.2. bibliometric analysis tools, 2.2.1. citespace, 2.2.2. histcite, 3.1. the historical features of the supply chain risk literature, 3.1.1. distribution of publications, 3.1.2. the veins of supply chain risk research field, 3.1.3. scientific cooperation, 3.2. variation of the most active topics, 3.2.1. subject category burst, 3.2.2. keywords burst, 3.2.3. reference burst, 3.3. emerging trends and new developments, 3.3.1. the temporal variation of keyword clusters, 3.3.2. the timeline visualization of references, 4. summary and future outlook, 4.1. cross-integration of multiple disciplines in supply chain risk management, 4.2. exploration of emerging themes, 4.3. further directions, author contributions, institutional review board statement, informed consent statement, data availability statement, conflicts of interest.

• Tang, O.; Nurmaya Musa, S. Identifying risk issues and research advancements in supply chain risk management. Int. J. Prod. Econ. 2011 , 133 , 25–34. [ Google Scholar ] [ CrossRef ]
• Hohenstein, N.-O.; Feisel, E.; Hartmann, E.; Giunipero, L. Research on the phenomenon of supply chain resilience: A systematic review and paths for further investigation. Int. J. Phys. Distrib. Logist. Manag. 2015 , 45 , 90–117. [ Google Scholar ] [ CrossRef ]
• Kleindorfer, P.R.; Saad, G.H. Managing disruption risks in supply chains. Prod. Oper. Manag. 2005 , 14 , 53–68. [ Google Scholar ] [ CrossRef ]
• Tang, C.S. Perspectives in supply chain risk management. Int. J. Prod. Econ. 2006 , 103 , 451–488. [ Google Scholar ] [ CrossRef ]
• Ambulkar, S.; Blackhurst, J.; Grawe, S. Firm’s resilience to supply chain disruptions: Scale development and empirical examination. J. Oper. Manag. 2015 , 33–34 , 111–122. [ Google Scholar ] [ CrossRef ]
• Tang, C.; Tomlin, B. The power of flexibility for mitigating supply chain risks. Int. J. Prod. Econ. 2008 , 116 , 12–27. [ Google Scholar ] [ CrossRef ]
• Ho, W.; Zheng, T.; Yildiz, H.; Talluri, S. Supply chain risk management: A literature review. Int. J. Prod. Res. 2015 , 53 , 5031–5069. [ Google Scholar ] [ CrossRef ]
• Heckmann, I.; Comes, T.; Nickel, S. A critical review on supply chain risk—Definition, measure and modeling. Omega 2015 , 52 , 119–132. [ Google Scholar ] [ CrossRef ]
• Tukamuhabwa, B.R.; Stevenson, M.; Busby, J.; Zorzini, M. Supply chain resilience: Definition, review and theoretical foundations for further study. Int. J. Prod. Res. 2015 , 53 , 5592–5623. [ Google Scholar ] [ CrossRef ]
• Fahimnia, B.; Jabbarzadeh, A. Marrying supply chain sustainability and resilience: A match made in heaven. Transp. Res. Part E Logist. Transp. Rev. 2016 , 91 , 306–324. [ Google Scholar ] [ CrossRef ]
• Snyder, L.V.; Atan, Z.; Peng, P.; Rong, Y.; Schmitt, A.J.; Sinsoysal, B. OR/MS models for supply chain disruptions: A review. IIE Trans. 2016 , 48 , 89–109. [ Google Scholar ] [ CrossRef ]
• Brandon-Jones, E.; Squire, B.; Autry, C.W.; Petersen, K.J. A contingent resource-based perspective of supply chain resilience and robustness. J. Supply Chain. Manag. 2014 , 50 , 55–73. [ Google Scholar ] [ CrossRef ]
• Claßen, G.; Koster, A.M.C.A.; Schmeink, A. Planning Wireless Networks with Demand Uncertainty Using Robust Optimization (No. 11481). Optimization Online. 2011. Available online: https://optimization-online.org/?p=11481 (accessed on 15 May 2024).
• Ghadge, A.; Dani, S.; Chester, M.; Kalawsky, R. A systems approach for modelling supply chain risks. Supply Chain Manag. Int. J. 2013 , 18 , 523–538. [ Google Scholar ] [ CrossRef ]
• Zhang, L.; Chen, T.; Huang, J. Emergency network model and algorithm based on min-max regret robust optimization. Chin. J. Manag. Sci. 2014 , 22 , 131–139. [ Google Scholar ]
• Ponomarov, S.Y.; Holcomb, M.C. Understanding the concept of supply chain resilience. Int. J. Logist. Manag. 2009 , 20 , 124–143. [ Google Scholar ] [ CrossRef ]
• Tukamuhabwa, B.; Stevenson, M.; Busby, J. Supply chain resilience in a developing country context: A case study on the interconnectedness of threats, strategies and outcomes. Supply Chain Manag. Int. J. 2017 , 22 , 486–505. [ Google Scholar ] [ CrossRef ]
• Ali, A.; Mahfouz, A.; Arisha, A. Analysing supply chain resilience: Integrating the constructs in a concept mapping framework via a systematic literature review. Supply Chain Manag. Int. J. 2017 , 22 , 16–39. [ Google Scholar ] [ CrossRef ]
• Ali, I.; Nagalingam, S.; Gurd, B. Building resilience in SMEs of perishable product supply chains: Enablers, barriers and risks. Prod. Plan. Control. 2017 , 28 , 1236–1250. [ Google Scholar ] [ CrossRef ]
• Blackhurst, J.; Dunn, K.S.; Craighead, C.W. An empirically derived framework of global supply resiliency: Framework of global supply resiliency. J. Bus. Logist. 2011 , 32 , 374–391. [ Google Scholar ] [ CrossRef ]
• Brusset, X.; Teller, C. Supply chain capabilities, risks, and resilience. Int. J. Prod. Econ. 2017 , 184 , 59–68. [ Google Scholar ] [ CrossRef ]
• Dyatkin, B. COVID-19 pandemic highlights need for US policies that increase supply chain resilience. MRS Bull. 2020 , 45 , 794–796. [ Google Scholar ] [ CrossRef ]
• Garrido Rios, A. A Mixed-Method Study on the Effectiveness of a Buffering Strategy in the Relationship between Risks and Resilience. Ph.D. Thesis, University of Warwick, Coventry, UK, 2017. Available online: http://webcat.warwick.ac.uk/record=b3202763~S15 (accessed on 15 May 2024).
• Hosseini, S.; Ivanov, D.; Dolgui, A. Review of quantitative methods for supply chain resilience analysis. Transp. Res. Part E Logist. Transp. Rev. 2019 , 125 , 285–307. [ Google Scholar ] [ CrossRef ]
• Matteson, N.L.; Hassler, G.W.; Kurzban, E.; Schwab, M.A.; Perkins, S.A.; Gangavarapu, K.; Levy, J.I.; Parker, E.; Pride, D.; Hakim, A.; et al. Genomic surveillance reveals dynamic shifts in the connectivity of COVID-19 epidemics. Cell 2023 , 186 , 5690–5704. [ Google Scholar ] [ CrossRef ]
• Pettit, T.J.; Croxton, K.L.; Fiksel, J. Ensuring supply chain resilience: Development and implementation of an assessment tool. J. Bus. Logist. 2013 , 34 , 46–76. [ Google Scholar ] [ CrossRef ]
• Pettit, T.J.; Fiksel, J.; Croxton, K.L. Ensuring supply chain resilience: Development of a conceptual framework. J. Bus. Logist. 2010 , 31 , 1–21. [ Google Scholar ] [ CrossRef ]
• Wicher, P.; Zapletal, F.; Lenort, R.; Staš, D. Measuring the metallurgical supply chain resilience using fuzzy analytic network process. Metalurgija 2016 , 55 , 783–786. Available online: https://core.ac.uk/reader/84392300 (accessed on 15 May 2024).
• Wieland, A.; Wallenburg, C.M. The influence of relational competencies on supply chain resilience: A relational view. Int. J. Phys. Distrib. Logist. Manag. 2013 , 43 , 300–320. [ Google Scholar ] [ CrossRef ]
• Ivanov, D.; Dolgui, A.; Blackhurst, J.V.; Choi, T.-M. Toward supply chain viability theory: From lessons learned through COVID-19 pandemic to viable ecosystems. Int. J. Prod. Res. 2023 , 61 , 2402–2415. [ Google Scholar ] [ CrossRef ]
• Jüttner, U.; Maklan, S. Supply chain resilience in the global financial crisis: An empirical study. Supply Chain Manag. Int. J. 2011 , 16 , 246–259. [ Google Scholar ] [ CrossRef ]
• Pettit, T.J.; Croxton, K.L.; Fiksel, J. The evolution of resilience in supply chain management: A retrospective on ensuring supply chain resilience. J. Bus. Logist. 2019 , 40 , 56–65. [ Google Scholar ] [ CrossRef ]
• Scholten, K.; Schilder, S. The role of collaboration in supply chain resilience. Supply Chain Manag. Int. J. 2015 , 20 , 471–484. [ Google Scholar ] [ CrossRef ]
• Sheffi, Y.; Rice, J.B., Jr. A supply chain view of the resilient enterprise. MIT Sloan Manag. Rev. 2005 , 47 , 41–48. Available online: https://sloanreview.mit.edu/article/a-supply-chain-view-of-the-resilient-enterprise/ (accessed on 15 May 2024).
• Zsidisin, G.A.; Wagner, S.M. Do perceptions become reality? The moderating role of supply chain resiliency on disruption occurrence. J. Bus. Logist. 2010 , 31 , 1–20. [ Google Scholar ] [ CrossRef ]
• Kim, H.M.; Laskowski, M. Towards an ontology-driven blockchain design for supply chain provenance. Intell. Syst. Account. Financ. Manag. 2016 , 25 , 18–27. [ Google Scholar ] [ CrossRef ]
• Jansson, F.; Petersen, O. Blockchain Technology in Supply Chain Traceability Systems: Developing a Framework for Evaluating the Applicability. Master’s Thesis, Lund University, Lund, Sweden, 2017. [ Google Scholar ]
• Jain, S.; Ahuja, N.J.; Srikanth, P.; Bhadane, K.V.; Nagaiah, B.; Kumar, A.; Konstantinou, C. Blockchain and autonomous vehicles: Recent advances and future directions. IEEE Access 2021 , 9 , 130264–130328. [ Google Scholar ] [ CrossRef ]
• Mittal, A.; Grimm, J. ICT solutions to support local food supply chains during the COVID-19 pandemic. J. Agric. Food Syst. Community Dev. 2020 , 10 , 237–241. [ Google Scholar ] [ CrossRef ]
• Rodrigues, E.B.; Lourenzani, W.L.; Satolo, E.G.; Braga Júnior, S.S.; Anholon, R.; Rampasso, I.S. Blockchain in supply chain management: A grounded theory-based analysis. Kybernetes 2023 , 52 , 1425–1444. [ Google Scholar ] [ CrossRef ]
• Hendricks, K.B.; Singhal, V.R. An empirical analysis of the effect of supply chain disruptions on long-run stock price performance and equity risk of the firm. Prod. Oper. Manag. 2005 , 14 , 35–52. [ Google Scholar ] [ CrossRef ]
• Wu, D.; Zhang, B.; Baron, O. A trade credit model with asymmetric competing retailers. Prod. Oper. Manag. 2019 , 28 , 206–231. [ Google Scholar ] [ CrossRef ]
• Yang, S.A.; Birge, J.R. Trade credit, risk sharing, and inventory financing portfolios. Manag. Sci. 2018 , 64 , 3667–3689. [ Google Scholar ] [ CrossRef ]
• Ben-Daya, M.; Hassini, E.; Bahroun, Z. Internet of things and supply chain management: A literature review. Int. J. Prod. Res. 2019 , 57 , 4719–4742. [ Google Scholar ] [ CrossRef ]
• Ivanov, D.; Dolgui, A.; Sokolov, B. The impact of digital technology and industry 4.0 on the ripple effect and supply chain risk analytics. Int. J. Prod. Res. 2019 , 57 , 829–846. [ Google Scholar ] [ CrossRef ]
• Faisal, M.N. Role of industry 4.0 in circular supply chain management: A mixed-method analysis. J. Enterp. Inf. Manag. 2023 , 36 , 303–322. [ Google Scholar ] [ CrossRef ]
• Rajesh, R. Technological capabilities and supply chain resilience of firms: A relational analysis using total interpretive structural modeling (TISM). Technol. Forecast. Soc. Chang. 2017 , 118 , 161–169. [ Google Scholar ] [ CrossRef ]
• Kamalahmadi, M.; Parast, M.M. A review of the literature on the principles of enterprise and supply chain resilience: Major findings and directions for future research. Int. J. Prod. Econ. 2016 , 171 , 116–133. [ Google Scholar ] [ CrossRef ]
• Bode, C.; Wagner, S.M. Structural drivers of upstream supply chain complexity and the frequency of supply chain disruptions. J. Oper. Manag. 2015 , 36 , 215–228. [ Google Scholar ] [ CrossRef ]
• Bode, C.; Wagner, S.M.; Petersen, K.J.; Ellram, L.M. Understanding responses to supply chain disruptions: Insights from information processing and resource dependence perspectives. Acad. Manag. J. 2011 , 54 , 833–856. [ Google Scholar ] [ CrossRef ]
• Ivanov, D. Predicting the impacts of epidemic outbreaks on global supply chains: A simulation-based analysis on the coronavirus outbreak (COVID-19/SARS-CoV-2) case. Transp. Res. Part E Logist. Transp. Rev. 2020 , 136 , 101922. [ Google Scholar ] [ CrossRef ]
• Jüttner, U.; Peck, H.; Christopher, M. Supply chain risk management: Outlining an agenda for future research. Int. J. Logist. Res. Appl. 2003 , 6 , 197–210. [ Google Scholar ] [ CrossRef ]
• Linnenluecke, M.K. Resilience in business and management research: A review of influential publications and a research agenda. Int. J. Manag. Rev. 2017 , 19 , 4–30. [ Google Scholar ] [ CrossRef ]
• Manuj, I.; Mentzer, J.T. Global supply chain risk management. J. Bus. Logist. 2008 , 29 , 133–155. [ Google Scholar ] [ CrossRef ]
• Nishat Faisal, M.; Banwet, D.K.; Shankar, R. Supply chain risk mitigation: Modeling the enablers. Bus. Process Manag. J. 2006 , 12 , 535–552. [ Google Scholar ] [ CrossRef ]
• Qian, G.; Yun, P.U.; Yan-Lai, L.I. Review of research on managing disruption risks in supply chains. China Bus. Mark. 2011 , 25 , 48–53. [ Google Scholar ] [ CrossRef ]
• Rao, S.; Goldsby, T.J. Supply chain risks: A review and typology. Int. J. Logist. Manag. 2009 , 20 , 97–123. [ Google Scholar ] [ CrossRef ]
• Revilla, E.; Saenz, M.J. The impact of risk management on the frequency of supply chain disruptions: A configurational approach. Int. J. Oper. Prod. Manag. 2017 , 37 , 557–576. [ Google Scholar ] [ CrossRef ]
• Sutrisno, A.; Kumar, V. Supply chain sustainability risk decision support model using integrated preference selection index (PSI) method and prospect theory. J. Adv. Manag. Res. 2022 , 19 , 316–346. [ Google Scholar ] [ CrossRef ]
• Thun, J.-H.; Hoenig, D. An empirical analysis of supply chain risk management in the german automotive industry. Int. J. Prod. Econ. 2011 , 131 , 242–249. [ Google Scholar ] [ CrossRef ]
• Wagner, S.M.; Bode, C. An empirical examination of supply chain performance along several dimensions of risk. J. Bus. Logist. 2008 , 29 , 307–325. [ Google Scholar ] [ CrossRef ]
• Fan, H.; Li, G.; Sun, H.; Cheng, T.C.E. An information processing perspective on supply chain risk management: Antecedents, mechanism, and consequences. Int. J. Prod. Econ. 2017 , 185 , 63–75. [ Google Scholar ] [ CrossRef ]
• Govindan, K.; Mina, H.; Alavi, B. A decision support system for demand management in healthcare supply chains considering the epidemic outbreaks: A case study of coronavirus disease 2019 (COVID-19). Transp. Res. Part E Logist. Transp. Rev. 2020 , 138 , 101967. [ Google Scholar ] [ CrossRef ]
• Sodhi, M.S.; Son, B.; Tang, C.S. Researchers’ perspectives on supply chain risk management. Prod. Oper. Manag. 2012 , 21 , 1–13. [ Google Scholar ] [ CrossRef ]
• Wagner, S.M.; Bode, C. An empirical investigation into supply chain vulnerability. J. Purch. Supply Manag. 2006 , 12 , 301–312. [ Google Scholar ] [ CrossRef ]
• Ivanov, D.; Dolgui, A. Viability of intertwined supply networks: Extending the supply chain resilience angles towards survivability. A position paper motivated by COVID-19 outbreak. Int. J. Prod. Res. 2020 , 58 , 2904–2915. [ Google Scholar ] [ CrossRef ]
• Manuj, I.; Mentzer, J.T. Global supply chain risk management strategies. Int. J. Phys. Distrib. Logist. Manag. 2008 , 38 , 192–223. [ Google Scholar ] [ CrossRef ]
• Ritchie, B.; Brindley, C. Supply chain risk management and performance: A guiding framework for future development. Int. J. Oper. Prod. Manag. 2007 , 27 , 303–322. [ Google Scholar ] [ CrossRef ]
• Tomlin, B. On the value of mitigation and contingency strategies for managing supply chain disruption risks. Manag. Sci. 2006 , 52 , 639–657. [ Google Scholar ] [ CrossRef ]
• Chopra, S.; Sodhi, M.S. Managing risk to avoid supply-chain breakdown. MIT Sloan Manag. Rev. 2004 , 46 , 53–61. Available online: https://sloanreview.mit.edu/article/managing-risk-to-avoid-supplychain-breakdown/ (accessed on 15 May 2024).
• Craighead, C.W.; Blackhurst, J.; Rungtusanatham, M.J.; Handfield, R.B. The severity of supply chain disruptions: Design characteristics and mitigation capabilities. Decis. Sci. 2007 , 38 , 131–156. [ Google Scholar ] [ CrossRef ]
• Haq, M.Z.U.; Aslam, H. Impact of entrepreneurial leadership on supply chain performance: The mediating role of supply chain resilience. J. Manuf. Technol. Manag. 2023 , 34 , 694–712. [ Google Scholar ] [ CrossRef ]
• Schmitt, T.G.; Kumar, S.; Stecke, K.E.; Glover, F.W.; Ehlen, M.A. Mitigating disruptions in a multi-echelon supply chain using adaptive ordering. Omega 2017 , 68 , 185–198. [ Google Scholar ] [ CrossRef ]

Click here to enlarge figure

Share and Cite

Ding, T.; Huang, Z. Uncovering the Research Hotspots in Supply Chain Risk Management from 2004 to 2023: A Bibliometric Analysis. Sustainability 2024 , 16 , 5261. https://doi.org/10.3390/su16125261

Ding T, Huang Z. Uncovering the Research Hotspots in Supply Chain Risk Management from 2004 to 2023: A Bibliometric Analysis. Sustainability . 2024; 16(12):5261. https://doi.org/10.3390/su16125261

Ding, Tianyi, and Zongsheng Huang. 2024. "Uncovering the Research Hotspots in Supply Chain Risk Management from 2004 to 2023: A Bibliometric Analysis" Sustainability 16, no. 12: 5261. https://doi.org/10.3390/su16125261

Article Metrics

Article access statistics, further information, mdpi initiatives, follow mdpi.

Subscribe to receive issue release notifications and newsletters from MDPI journals