Measuring Price Sensitivity And The Macroeconomic Environment Essay

1625 WordsDec 5, 20167 Pages
Introduction According to Bijmolt, Van Heerde, and Pieters (2005) price sensitivity is one of the most widely studied disciplines of marketing fields, however there are fewer studies detailing the relationships and microeconomic factors between price sensitivity and the macroeconomic environment. This report explored each category listed below, as businesses, in particular, XYZ Company, must use microeconomic principles to make and validate decisions based on the following factors: price elasticity, consumer choices, production and costs, supply and demand, aggregate supply and aggregate demand, and macroeconomic measurements. Microeconomic principles aligned with macroeconomics, enable businesses to understand the behavior of individual business units and an organization, to predict, plan and achieve success. Elasticity Gordon, Goldfarb, and Yang (2013) examined price sensitivity changes with the macroeconomic environment. The authors explored this relationship by measuring price elasticity using household-level data across 19 grocery categories over 24 quarters. The researchers extended the works related to meta-analyses of price elasticity by Bijmolt, Van Heerde, and Pieters (2005), as well as Bronnenberg, Mela, and Boulding (2006) on estimating price elasticity across categories. Their results provided a rich set of measures of price sensitivity across categories and over time. These measures should enable XYZ Company to move beyond common effects and focus on
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