linear_elasticity: linear_elasticity

In inventorize: Inventory Analytics, Pricing and Markdowns

linear_elasticity

Description

calculating elasticity of a linear price response function This function is helpful to determine if your product is elastic or not based on a linear price response function. if product demand is not linear to price, try using the single product optimization function instead. The price elasticity of demand which is often shortened to demand elasticity is defined to be the percentage change in quantity demanded, q, divided by the percentage change in price, p. When Elasticity bigger 1, we say the good is price elastic.In this case, percentQ bigger percentP, and so, for a 1 percent change in price, there is a greater than 1 percent change in quantity demanded.In this case, management should decrease price to have a higher revenue. When Elasticity smaller 1, we say the good is price inelastic.In this case, percentQ smaller percentP, and so, for a 1 percent change in price, there is a less than 1 percent change in quantity demanded.In this case, management should increase price to have a higher revenue. When Elasticity equal 1, we say the good is price unit elastic.In this case, percentQ equal percentP , and so, for a 1percent change in price, there is also an 1percent change in quantity demanded. This is the optimal price which means it maximizes revenue.

Usage

linear_elasticity(prices, Sales, present_price, cost_of_product, plot = FALSE)

Arguments

prices	vector of prices.
Sales	Vector of sales against each price .
present_price	numeric, present price of the product .
cost_of_product	cost of the product, if the product/service has no cost ,then cost is set to zero.
plot	Default is false,if true, a plot is generated

Value

the elasticity at the present price , the price for optimum revenue and thee price for optimum cost.

Note

this is the third version of the inventorize package, all the functions are without any academic contribution from my side, the aim is to facilitate and ease much of the bookkeeping that is endured during stock analysis.

Author(s)

"haytham omar email: "<[e-mail]>"

Examples

linear_elasticity(prices=c(5,10,8,5,14),Sales= c(450,400,420,450,360),
present_price=15,cost_of_product=40)

inventorize documentation built on June 1, 2022, 1:07 a.m.