Factors Affecting Price Elasticity of Demand and Mercedes Cars.
Added on - 25 Sep 2019
Factors Affecting Price Elasticity of Demand and Mercedes CarsAvailability of SubstitutesMercedes’ luxury cars have other substitutes in the market such as Porsche, Jaguar, Maserati,and others. In this case, if the price of the Mercedes’ cars is reduced to gain the market share,then it can be clearly stated that Mercedes will be at loss. The reason is its target customers whoprefer high class branded products that are of exceptional price levels and who prefer to flauntexpensive products. Therefore, reduction in Mercedes’ price will divert these customers towardsmore expensive aforementioned alternatives that can provide them high class image andreputation (Andersen et al, 1997).Percentage of Consumer’s BudgetThe consumers of Mercedes have substantial budget for luxurious products and, therefore, itcannot be suggestive to state that the reduction in price would attract their attention towardsMercedes. The initial euphoria can be there as some consumers might see it as achievement topossess Mercedes. However, those who understand they can easily afford such cars and similarothers – who being the main target consumers – would rarely prefer to orient towards Mercedes.Time Period of AdjustmentFor this factor, it can be stated that initially the reduction in price of Mercedes cars will attractnumerous buyers who had desire to ride the vehicle and even the high class consumers who caneasily afford the other luxurious cars would prefer to keep one Mercedes brand at that time.However, it is possible that Mercedes might lose its shine of being costliest car brand as the main