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This man is a millionaire – his income is £500,000 a year.

This man is a millionaire – his income is £500,000 a year. Would it make any difference to him wanting to buy a new Rolls Royce if his salary increased to £600,000 a year?. This is a newly qualified doctor – she earns £23,000 a year.

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This man is a millionaire – his income is £500,000 a year.

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  1. This man is a millionaire – his income is £500,000 a year. Would it make any difference to him wanting to buy a new Rolls Royce if his salary increased to £600,000 a year?

  2. This is a newly qualified doctor – she earns £23,000 a year Will it affect her demanding / affording a new car when she Earns £40,000 a year after 4 years?

  3. Elasticity of income This is the relationship of a change in our incomes to wanting more or different products or services

  4. Last Marketing topic of AS Marketing • Elasticity of demand – Unit 9 in Marcouse textbook We going to find out: • What is it? • How do you measure it? • Why is it important?

  5. Elasticity of demand • A way of measuring how a customer’s demand for products or services is affected by change in price / advertising expenditure or consumer incomes

  6. Elasticity of demand • This is the formula – you have to learn it for the exam! % change in demand ------------------------- % change in price

  7. Elasticity of demand Example • Price of Mars Bar changes from 30p to 33p • Demand for Mars Bars falls from 1000 to 800 • What is the elasticity of demand?

  8. Elasticity of demand Work this one out • Price of VW Golf cut from £1000 to £9000 • Demand for VW Golf increases from weekly sales of 50 to 75 • What is the elasticity of demand here?

  9. Decision Making – hunch or scientific? • You have to decide whether you should increase your prices in order to make more profit • What thoughts should go through your mind?

  10. Hunch approach • “ What in my experience, or using my gut reaction will happen to demand from my customers?”

  11. Scientific approach • Lets do some primary market research • “ would you still buy this product, or as much of it if the price increased ?”

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