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Regarding the technical article ” BUSINESS STRATEGY AND PRICING”, why does it states ” luxury goods are likely to be more sensitive to price
changes than necessities ” ?It shouldn’t’ be luxury goods are less price sensitivity than the necessities since for luxury goods the consumers are concern more about the brand and quality rather the price?
Price sensitivity compares the relative change in quantity price to the relative change in price.
For example, consider rice and caviar. Caviar is more expensive than rice and demand for it will be lower, but that is saying nothing about price sensitivity – it is supply and demand.
If the price of each weer to double, it is argues that demand rice would not change much because it is an essential food source for many. However, no one needs caviar and demand is likely to fall a lot,
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