Using price elasticity of demand to help determining a pricing policy?

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  • #1
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How can price elasticity of demand for some data help in determining a decision making process in a future pricing policy?
I have some data that I want to analyze. I am given prices and demand for different products over a period of time. And I would like to use the price elasticity data to get some answers (or maybe other methods?).

I would appreciate any ideas on how to go about approaching this problem.
I was thinking about performing a regression analysis, but, according to the data that I have, I don't think demand only depends on the price, given the fact that the prices given are mostly stable, and the demand fluctuates a lot.
 

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  • #2
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I was thinking about performing a regression analysis, but, according to the data that I have, I don't think demand only depends on the price, given the fact that the prices given are mostly stable, and the demand fluctuates a lot.
Well, there is certainly some dependence on the price. A regression analysis could help to identify this. If there are additional factors that depend on or influence both price and demand, this can be problematic, but there is no way to determine this without more details.
 
  • #3
SteamKing
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A regression analysis can help you analyze the factors going into the price-demand relationship.

Have you done the first step, which is plot your data? This can tell if you have a relatively linear relationship between price and demand or if the relationship is somewhat non-linear. That helps to determine the type of regression analysis to perform.
 

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