Objective: Measuring whether there is a tangible difference between digital asset purchases between two groups that are distinct.
Research question: Does the price elasticity of demand for digital asset purchases differ between two groups that are distinct in terms of location and economic status?
Abstract: Between two groups that are distinct in terms of location and economic status, it was attempted to ascertain if there was a difference in price elasticity of demand for creative digital assets. The tool for price elasticity of demand analysis available in Excel’s Solver add-in was used to compute elasticities and produce the results using Solver’s GRG Nonlinear engine.
Further Info
Price elasticity of demand (PED or Ed) is a core concept in finance and economics and, unsurprisingly, a crucial indicator for any business or organisation that sells products or services for which it has some pricing flexibility. This means that neither an outside organisation nor a highly competitive environment should be able to set the price. Many executives are apprehensive about setting or changing a product’s pricing, despite the fact that this is one of the most critical decisions to be made. A well-thought-out price modification can increase earnings and foster a positive environment within a business. Economists frequently use price elasticities to compare products and how consumers respond to a single price adjustment. How does the price of alcoholic beverages compare to that of vegetables, for instance?
The price elasticity of demand, given a demand curve, is the percentage of demand decline brought on by a 1% rise in price. Demand is price elastic when elasticity exceeds 1. When demand is price elastic, lowering prices will boost sales. Price inelastic demand occurs when elasticity is less than 1. A price reduction will result in lower revenue when demand is price inelastic. For instance, a 1% reduction in air travel prices can lead to a 4% rise in demand for air travel. To choose the best price point, executives must comprehend the price elasticity at each price point. Therefore, price and quantity are inversely connected, according to the law of demand. Whenever prices fluctuate, units always move in the opposite direction. What happens to revenue, though, is the true problem. Demand must be inelastic for revenue to follow the price direction, as revenue is defined as price * units. Revenue will move in the direction of the unit if demand is elastic. Price should therefore rise under an inelastic demand curve to increase revenue. In an elastic demand curve, prices should drop to increase revenue.