Calculating Price Elasticity of Demand, Revenue, and Profit
Analyze the sensitivity of Demand, Revenue, and Profit to price changes.
Initial State
New State
Cost Structure
Price Elasticity of Demand
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Price Elasticity of Revenue
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Price Elasticity of Profit
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Financial Levels (Before & After)
| Metric | Initial | New | Difference |
|---|---|---|---|
| Revenue | -- | -- | -- |
| Unit Margin | -- | -- | -- |
| Total Profit | -- | -- | -- |
Strategic Insights & Tension Analysis
1. Demand Elasticity (Threshold: -1)
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2. Revenue Tension (Price Effect vs. Volume Effect)
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3. Profit Tension (Margin vs. Volume)
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How to Interpret These Numbers
Demand Elasticity
Measures customer sensitivity.
Measures customer sensitivity.
- |E| > 1: Elastic. Volume swings are larger than price swings.
- |E| < 1: Inelastic. Volume remains relatively stable.
Revenue Elasticity
Measures top-line sales impact.
Measures top-line sales impact.
- E > 0: Positive. Revenue moves with price.
- E < 0: Negative. Revenue moves against price.
Profit Elasticity
Measures bottom-line leverage.
Measures bottom-line leverage.
- E > 1: High Leverage. A 1% price hike boosts profit by > 1%.
- E > 0: Positive. Profit moves with price.
- E < 0: Negative. Profit moves against price.