Edexcel Business A Level Revision

Increasing profitability is often a major aim for growing businesses. There are several ways in which this can be achieved. Businesses are not limited to one of these options but must realise each option has knock on implications. 1) SELL THE SAME AMOUNT AT HIGHER PRICE This will hopefully increase your revenue... HOWEVER , Will you lose customers if prices are raised? What prices do competitors charge? because if you're too high then customers could just go to your competitors as some believe more in a bargain than brand loyalty, so how loyal are your customers? Will you have to spend more on maintaining brand image? Higher prices drives customers away, leaving a bad reputation on the brand so the business may have to maintain its brand image to keep a customer base. This option is only good if the product is price inelastic such as gasoline because the business has a necessity good that consumers don't mind if prices go up a little bit, meaning demand doesn't fall rap...

Price elasticity of demand (PED) - Measures the extent to which the quantity of a product demanded is affected by a change in price. The demand for goods and services varies depending on a range of factors. Elasticity - measures the responsiveness of demand to a change in a relevant variable - such as price or income. PED IS CALCULATED AS : % Change in Quantity Demanded ÷ % Change in Price Price Elastic - More than 1 Price Inelastic - Less than 1 Unitary price elasticity - Exactly 1 Price elastic = Change in demand is more than the change in price. Price inelastic = Change in demand is less than the change in price. Unitary price elasticity = change in demand is equal to change in price. Example of Inelastic demand: Gasoline has inelastic demand . This means that when there's an increase in the price of gasoline, the quantity demanded decreases just a little bit. So when the demand is inelastic, the quantity is insensitive to a change in p...