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Describe the concept of inelasticity as it impacts on the development of a market-based or competition-driven...

Describe the concept of inelasticity as it impacts on the development of a market-based or competition-driven price for a manufacturing-related semi-finished or sub-assembly product. What effect does the supplier of such a product using differentiation value have on this type of elasticity? What role, if any, does product differentiation have on the Economic Value of such a product? Explain your answer.

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Answer #1

Inelasticity: Inelasticity means when due to change in price of a good/service its quantity demanded does not change in the same proportion or change very less and when price elasticity is zero then demand is totally inelastic and fixed.

When the supplier offers to give some discount with replacement option(in case of quality issue) to purchase a certain quantity on certain price then this strategy can make that good elastic to a certain extent and price sensitive since this differentiation will create and generate demand for their product.

The above differentiation value will create economic value also for the buyer because buyer will be able to purchase more of the product which has discount available with it which can be quantified in economic value as well as replacement, if any, if product is defective which again saves the buyer from any economic loss.

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