Insurance Revenues

When a company decides to change the price of a product, it knows the demand for that product will change as a result. Elasticity measures this change in demand as a result in the change in price.

In an effort to increase revenue for the insurance industry, all insurance companies increased prices by 20 percent. To its dismay, only a 10% increase in revenue was received instead of the 20% increase that was expected.

Prepare an essay that addresses the following questions:

What does this say about the elasticity demand for insurance products?
What were the insurance companies assuming the elasticity demand would be?

Remember APA Format; Title Page, In text citations, Spelling, Grammar, Reference Page, Academic Resources

preview of the answer…

Elasticity of demand refers to the sensitivity of consumers to flux in price of commodities or services. This implies that increase or decrease in the price of a commodity receive a corresponding increase or decrease in the demand. It is important that a company understands that there are different types of elasticity of demand. There are methods that a company can use to be able to effectively pre-determine the effect of changing prices of their products.

APA 348 words