Why model profit, not just revenue?
Because a price rise that grows revenue can still cut profit if you lose too many sales, and a price cut can lift profit if volume jumps enough. Profit is what actually matters.
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Pricing Strategy Impact Model
Model a price change's effect on profit, not just revenue — elasticity drives the demand response and unit cost reveals whether the move actually grows profit.
%ΔQ = elasticity × %ΔP ; profit = (price − unit cost) × quantity
Frequently asked questions
How does elasticity drive this?
It sets how much demand responds to the price change. The more elastic (sensitive) buyers are, the more units you lose when you raise prices, which can erase the gain.
Why does unit cost matter here?
Because profit is price minus cost times quantity. Knowing the cost reveals whether selling more units at a lower price actually pays, or just adds busywork.
Can cutting prices raise profit?
Yes, if demand is elastic enough that the extra volume more than offsets the thinner margin. The model shows exactly when that happens for your numbers.
Where do I get an elasticity estimate?
From past pricing experiments, market research, or industry norms. Since it is uncertain, test a range of values to see how sensitive your decision is.