Week 3 Discussion Question
You are advising the stakeholders of a small firm that is one of a handful of manufacturers of disposable contact lenses, wetting solution and other products related to eye care. The stakeholders are wrestling with a proposal to implement a price increase for some, all, or a large number of their products. They all agree that doing so can help offset recent cost increases the firm has experienced, but there the agreement ends.
Some favor a small price increase for products across the board, noting that, from the standpoint of the market, demand for healthcare products is relatively inelastic. Others believe that strategy could backfire, hurting more than helping. Instead, they argue, there are a number of factors to consider—the strength of the economy, their competition, trends in the market for specific types of products, and so on. They believe, therefore, products or types of products should be considered on a case-by-case basis: while a price increase for one product might yield positive results, a price increase for another might wipe out any gain achieved by the first.
What would you say to these stakeholders? Formulate your advice, drawing on course readings, other scholarly sources, and the concept of healthcare price elasticity.
To support your work, use your course and textbook readings and also use the South University Online Library. As in all assignments, cite your sources in your work and provide references for the citations in APA format.
Your initial posting should be addressed at 150-300 words. Submit your document to this Discussion Area by the due date assigned. Be sure to cite your sources using APA format.
Respond to your peers throughout the week. Justify your answers with examples, research, and reasoning. Follow up posts need to be submitted by the end of the week.
Use the following rubric as a guide to complete your discussion responses.
Price elasticity of demand is the measure of the receptiveness of demanded quantity of service or good to change in its price (Yu, 2017). In another perspective, it is used to define a scenario where a change in the demand is complex to a slight change in price. For instance, in case the price of Lays chips rises, the consumers are more likely to shift to different brands, driving demand down and vice versa. Mostly, price elasticity of demand provides percentage change in required quantity in response to the percentage change in the price, other aspects held constant. In several cases, the price elasticity provides a negative value, although negative signs mostly are ignored. For instance, the price of a given product may increase by 20 percent and the required quantity reduce by 20 percent. In a case like that, elasticity at original price and quantity = -20/20% = -2. This particular measure is equally referred to as the own-price elasticity of the demand for goods. Whenever a change in price has a high effect on the quantity of demanded good, then, demand for that particular good is well-thought-out to be flexible, and whenever the effect is minor, it’s said to be inflexible.
I can inform the shareholders that it is not easy to make a decision on how to increase or lower the piece of the particular product or the service and that it is much harder to attain the change. Certain factors like proper timing need to be applied so as to successfully achieve this. Therefore, the company may be called upon to carry out a market survey to determine how customers perceive the market demand and the product or service value at hand. Once the price of the product changes, conducting a survey aids the company to foresee the behavior of the customers and their competitors’ reactions. For instance, the price of the product should be raised only when the business is said to have undergone the least resistance. This can be carried out during festive seasons like the Christmas holidays since customers tend to pay minimal attention to the prices of the products and services. Raising the price of healthcare products like wetting solutions, disposable contact lenses, and other products in relation to eye care can be the time new and improvised products have been brought to the market.
I would as well inform the stakeholders that by changing the value of the product at hand change in the price of the given product can successfully be attained. This can be attained by various means. The company can make a decision to change the price of the product without making changes in its value and vice versa. For instance, the company may change the quality or the quantity of the product while slightly lowering or maintaining the initial price of the product, but the reduced quantity is higher than the price reduced. The approach of concurrently changing the value and the price of the product is much effective since it confuses lots of consumers which can therefore have long-term results (Herbes et al., 2020). On the contrary, the company may raise the cost of the product and set the product offer. For example, manufacturers of healthcare products like wetting solutions, disposable contact lenses, including other products in relation to eye care may increase the cost of the lenses and decide to make an offer in situations of bulk buying.