The price elasticity of demand measures how much demand for a product or service changes in response to a price change. Simply put, if the demand shifts dramatically in response to a price change, the good is considered price elastic. On the other hand, if the quantity demanded changes only slightly in response to a change in price, the commodity is considered price inelastic.
Since it's essential to understand the concept for companies, this blog will focus on the price elasticity of demand examples. That is, the types of price elastic products so you can change prices proactively to capture optimal sales and not lose out on revenue. Of course, there are multiple price elastic goods, but this list has some of the most popular items for companies to leverage a price elasticity pricing strategy.
Now, there are multiple factors affecting price elasticity of demand and not just price alone. The product’s quality, service and availability of offers equally matter. Keeping this in mind, let's dive into the examples of price elastic goods that will help companies improve their pricing strategy.
1. Luxury Goods
Luxury goods are often considered examples of elastic demand because they are not essential items people need to survive. Examples of luxury goods include high-end clothing, jewellery, and designer handbags. Therefore, when the prices of these items go up, consumers may delay their purchase or look for more affordable alternatives.
For example, suppose a high-end clothing brand raises the price of its products. Customers who value the brand but find the price increase too high may purchase clothes from a different brand or wait for a sale.
In contrast, if the brand lowers its prices, there may be an increase in demand from customers who were previously unable or unwilling to purchase the clothing at a higher price.
Similarly, when the price of luxury goods decreases, there may be an increase in demand from customers who previously could not afford them. The price reduction may make the goods more accessible and appealing to a broader range of consumers. Moreover, this may consequentially affect their supply, and the product’s price elasticity of supply also enters the picture gradually.
2. Airline Tickets
One of the more popular price elasticity of demand examples is airline tickets. When airfare increases, consumers may decide to postpone their travel plans or look for alternative means of transportation, such as driving or taking a bus. On the other hand, if airline companies lower their prices, there is usually a surge in ticket demand.
For example, if a customer is planning a vacation and the price of airline tickets is too high, they may choose to delay their trip or look for alternative ways to get to their destination. Conversely, if the airline lowers the ticket prices, the customer may be more likely to book the trip and travel by plane.
Airline companies often use dynamic pricing strategies to adjust ticket prices based on consumer demand. For example, they may offer lower prices during off-peak travel, such as weekdays or early mornings, to encourage more bookings. Similarly, when the demand is higher, they may raise prices during peak travel times, such as holidays or weekends.
3. Fast Food
Fast food is another price elastic product example because it is a discretionary expense that people can easily avoid if the price becomes too high. When the cost of fast food increases, consumers may choose to cook at home or opt for cheaper alternatives. On the other hand, when fast food prices fall, demand usually increases.
For example, if a fast food chain raises the price of its menu items, customers may buy food from a different restaurant or cook their meals at home. However, if the fast food chain lowers its prices, customers may be more likely to buy meals from the restaurant.
Fast food chains often offer discounts or special promotions to attract more customers. For example, they may offer "value meals" that include several items at a lower price than if purchased separately. They may also offer coupons or loyalty programs that reward customers for repeat purchases.
Gasoline is one of the best examples of elastic products because consumers have many options when it comes to transportation. When the price of gasoline increases, people may choose to carpool or take public transit instead. They may also switch to a more fuel-efficient car or reduce their overall driving. However, if the price of gasoline drops, there is typically an increase in demand.
5. OTT Platforms
One of the price elasticity of demand examples of today is the streaming services like Netflix, HayU, Amazon prime, and the like because viewers are susceptible to switching to another OTT platform if there is a price rise. Moreover, along with price changes, the availability of shows also matters to the customers. Such factors influence the consumers decision to continue their subscription.
6. Furniture and Home Décor
Furniture is another one of the price elasticity of demand examples. When people intend to buy furniture or even any home décor pieces, they tend to tally the prices and quality with different other showrooms. Their main goal is to get a quality sofa set or bed at a good deal. And when there is an evident price rise from the other alternatives, it leads to a decrease in demand.
In conclusion, price elasticity of demand is an important concept that affects consumer behaviour and the pricing strategies of businesses. The price elasticity of demand examples mentioned above demonstrate how price changes can influence consumer behaviour and why it's essential for companies to understand the price elasticity of their products or services to make informed pricing decisions.
If a product’s demand is subject to change dramatically, the prices need to be adjusted quite often. This may involve repeated market research, competitor pricing research, product value proposition to find the right price and more. Sometimes, price change needs to happen quite often, just as Amazon does to stay competitive. This is where an AI pricing platform can get the work done automatically in seconds. SYMSON leverages data and smart algorithms to find accurate prices for your product portfolio. Therefore, it clears up manual and tedious tasks from your team’s plate so you can focus on other important aspects without any rush. To know more about inelastic products, you can check out elasticity vs inelasticity and how they are different.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!