16 February 2012

Elasticity in action

GS says: "The following graph shows some preliminary data for the impact of our most recent rate increase on consumption – looks from an initial perspective that the rate increase needs to be > 20% to effect some behavioural change [an elastic response]... What is interesting is [how] a rate decrease resulted in increased consumption..."


What you are seeing is a "carefree zone" where customers who saw small changes in prices did not change their consumption by much (statistically the same as zero) and increases/decreases in consumption outside the zone associated with stronger decreases/increases (respectively) in prices.

2 comments:

  1. Who is GS? Goldman Sachs? Can you link the article from which you took this graph?

    ReplyDelete
  2. @Fletch -- proprietary data for now :(

    ReplyDelete

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