ALG June 2015

Hi there,

With reference to the above question on the discussion part c)

Details given for every $2 increase in selling price demand would be expected to fall by 2000 units and for every $2 decrease in selling price, demand would rise by 2000 units.

Is right that the PED price elasticity of demand is 100% in this case? and if so…can i comment that since price is very elastic (>1) a target costing approach would be suggested for consideration on top of the current skimming. And i’ll go on explaining two lines into about target costing, whilst also providing some arguments for market skimming.