Explain and Calculate Demand Elasticity
Students who have taken a course in economics will understand the concepts of supply and demand. Furthermore, we know that the demand curve is an inverse curve that explains a consumer's demand (or willingness to pay, WTP) for a product or service. Therefore, the higher the price, the lower the willingness to pay, and vice versa.
Demand curves, although theoretical, hold for products and services. However, the slope or shape of the demand curve varies according to the product or service offered. We know, from economics, that the intersection of the demand and supply curves is called the equilibrium point. This is where the business is transacted.
Marketers generally do not talk about the equilibrium point or equilibrium price. Rather, marketers talk about the market price, or the price generally paid in the market for a good or service. The market price is like the equilibrium price, which can be observed by seeing what prices are actually paid for a good or service.