One of the factors to consider in having an effective strategic business planning

is the price of products or services offered to the consumers. This significance is

based on the theory in Microeconomics known as price elasticity of demand and

supply. These measure the responsiveness of either the supply or demand of

goods or services to any changes in price of these goods or services.

The article Guide to Pricing Your Products or Services Properly by Gustke

(2007) provides pricing methods to effectively boost sales and marginal profits.

The author suggested that in pricing products or services, one must take into

account the position of ones product or services in the market, how the price

affects the demands for these goods or services, their variable and fixed costs

and the legal rules on pricing (para 1).

The article addressed the different factors that significantly affect prices

such as the economy, competition and position of products or services in the

market. It also gives the bases of calculating price adjustments. These factors

may be incorporated into one single concept of determining price elasticity. The

apparent consequence of adjusting the price of goods or services is the change

of the level of demand for these products or services from the customers.

Customers tend to buy more when the prices goes down while buy less when

there is an increase of prices. This is a case of high price elasticity (Moffatt,

2007, para 22). In this regard, as what can be ascertained from the article, price

changes or the level of price elasticity affects profit margins and business

companies always take into account the effect of price adjustments in increasing

profit margins.
References

Gustke, Constance, “Guide to Pricing Your Products or Services Properly:, 2007.

15 September 2007.< http://www.smallbusinessweekly.com/>

Guide to Pricing Your Products or Services Properly

Moffatt,Mike. Price Elasticity of Demand”, 2007. 15 September 2007.

<http://economics.about.com/cs/micfrohelp/a/priceelasticity.htm