Promotional Elasticity
Elasticity is percent change in quantity divided by percent change in price.
Cheat sheet
Elasticity is percent change in quantity divided by percent change in price.
What to check first
Use comparable days and check whether other events explain the change.
How to make the call
Reject the discount unless repeat or complementary purchases cover the ₹400 gap.
OpenStax · Pricing products and services · further reading for pricing & product
Indian practice case
Fictional scenario
A Nagpur café cuts price from ₹100 to ₹90 and matched-day volume rises from 100 to 120 cups. Variable cost is ₹60.
Reveal the step-by-step solution
- Diagnose the problem.
Use comparable days and check whether other events explain the change.
- Work through the evidence.
Base-period elasticity is 20% ÷ −10% = −2. Contribution falls from ₹4,000 to ₹3,600.
- Recommend and validate.
Reject the discount unless repeat or complementary purchases cover the ₹400 gap.
More Indian cases
Interview question
How would you use promotional elasticity to make the decision in this case? Explain which data you need first and what would change your recommendation.
See what a strong answer includes
Base-period elasticity is 20% ÷ −10% = −2. Contribution falls from ₹4,000 to ₹3,600. Reject the discount unless repeat or complementary purchases cover the ₹400 gap.