The effect of price elasticity in the decision of consumers in Saudi Arabia to acquire Toyota SUVs - Dissertation Example

The paper tells that price elasticity is an important element when introducing products in a competitive market. As quoted from the book Principles of Economics by Alfred Marshall, “the elasticity (or receptiveness) of demand in a market is significant according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price". Parkin, Powell, and Matthews noted that the following affect the elasticity of price for a certain commodity: availability of substitute goods; percentage of income; necessity; duration; brand loyalty; and who pays.

Farris, P., et al. postulated that company decision makers have to understand price elasticity to boost pricing strategies. Own, cross, and residual elasticity appear to exhibit subtle differences but further examination shows significant pragmatic implications. A study conducted by Engage Research explored on the relationship between elasticity and pricing strategy. Results based on the sales data showed significant difference between categories when equated with elasticity. The study indicated that the following product categories exhibited high elasticity: products with several brands; competitive market share among brands; insignificant trace of brand differentiation; and high price visibility.

Studies that focus on consumer reaction to price elasticity are rarely made available to the public. Most marketing firms, which conduct such studies, are barred from disclosing relevant results without the permission of their client. Hence several literatures have founded their assumptions based on prevailing theories that explain consumer behavior when price spikes occur. Some companies also consider aspects other than price. Brand loyalty and product reliability are important elements that push manufacturers, distributors, and retailers to move prices despite the potential consumer backlash.

In the automotive industry, for instance, car dealers offer improve payment schemes to compensate for the price movement. Objective The main objective of the study is to show the effect of price elasticity in the