ConVoyage October 2011

Page 14

CONVOYAGE

October ‘11

The client now wants to know how demand elasticity will affect the gross margins of its individual products What should the graph look like?

It turns out that demand elasticity and gross margin do not have the inverse linear relationship that we would expect

1. What observations can you make from this graph? 2. What should the client’s new strategy be in each of the four graph quadrants?

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