Anna-Marie Birchmore

I just opened a flower shop and have discovered there are many different factors that play a role in making the most profit. I was told told that elasticities are very important in determining prices and what product to supply, but what does this mean? To start what is elasticities. Elasticity is the measure or ratio of the percentage change in one variable to a change in another. It refers to the change in supply or demand in relation to the change in the price. What is the price elasticity of demand? It compares the percentage of change in the quantity that is demanded of a good or service to the percentage of change in the price of a good or service. You can find the price elasticity of demand by dividing the percent change in the quantity demanded of a product or service by the percent change in the price of a product or service. There are several factors that you can look at to determine the price elasticity of demand. One factor that you need to take into account is the availability of substitutes. If you think about substitutes when it comes to flowers you can take into account chocolates, cards, or even artificial flowers. Another factor is the nature of the good is it necessary for human life? Flowers are a luxury good which during certain times of the year are more necessary than others for example Mother’s Day, Valentine’s Day, holidays and birthdays. Another factor is the percentage of income spent on the product or the income level of an individual. Considering the percentage of income used to purchase flowers is low price changes should not have a big effect on the quantity demanded during certain times of the year. Rich people and poor people are not equally affected by the change in price. People with a lower income are more affected by changes in price. There are several other factors including the price level, short run vs.