0
$\begingroup$

I'm trying to make the argument that our Sales go up when prices for all our Products are 30% off. Which I believe should be our new Regular Price. but our Demand Curve doesn't support this. Should I be setting up the demand curve differently? on a per product basis? or package size?

  • I sell our food product in different package sizes 2oz, 4oz, 9oz , 16oz 3.5lb

  • Normalized the time our products were at that price.

Demand Curve

$\endgroup$
0
$\begingroup$

Counting your quantity in ounces makes sense, I wouldn't change that (I assume each point is a total sales/price combination at a given time?).

If you want to look at the impact of a percentage change in your price, you should take the logarithm of price. A .3 change in log(price) is roughly equivalent to a 30% change in price.

That said, you do in fact see a downward slope on your demand curve, which indicates that a drop in price is correlated with an increase in sales, although it's a general negative relationship and there's nothing special about 30% in particular (I wouldn't expect there to be!). So you're pretty much showing what you want (discounting issues about statistical significance, or causal identification - if these prices aren't set randomly this isn't technically showing you a demand curve).

$\endgroup$
  • $\begingroup$ Thank you Nick is there a good book or source that speaks about "real world demand curves" . When demand curves are not perfectly elastic. and how to deal with promotion periods how that impacts the Demand Curve $\endgroup$ – John Kelly Feb 18 at 4:41
  • $\begingroup$ I'd recommend starting here: economicsdiscussion.net/demand/… The key thing to get around in your case is that, if the demand curve itself is shifting over time, then the change in price/quantity will actually be revealing something about the supply/producer side of the market. So you ideally want to isolate shifts in price that DON'T come from changes in the demand curve. Promotion periods may be one good way to do that. $\endgroup$ – NickCHK Feb 18 at 19:28

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.