Good News for PepsiCo: Consumer Reaction to Price Increases Is Better Than Expected
Price elasticity is a marketing theory that tries to calculate the magnitude of consumers' reactions to a company's change in prices. For instance, it can help a company like PepsiCo (NASDAQ: PEP) determine how many fewer beverages it will sell if the company increases prices by 5%?
A classic example of a very "inelastic" product is gasoline. A reduction in the price of gasoline doesn't really increase demand much and an increase in price doesn't hurt demand much either. People and businesses need gas to get around and will pay for it, whatever the price. The pricing of other products is more elastic, so price changes (even small ones) can cause substantial changes in demand or in supply.
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Source Fool.com
