4 ms·
A good question with an unfortunate answer: the demand curve is a curve, not a line, and it's a curve that changes shape when measured. If you test at $100 and
by SiVal 14y ago
A good question with an unfortunate answer: the demand curve is a curve, not a line, and it's a curve that changes shape when measured. If you test at $100 and then at $50, what you're testing isn't the demand at $50, it's the demand for a $100 product that has been discounted for some reason to $50. Some will wonder why it apparently wasn't worth $100. They'll be less likely to buy, even for $50. Others will wonder if the $50 is temporary and jump on the deal. Which group will be bigger? How would you know? If you restore the price to $100, you'll be testing the demand for a product that is now better known than when it was originally $100, so it should sell more than before, but many of those new people will think of it as a $50 product with a jacked-up price. They'll regret not having bought it when it was $50 and not want to feel like suckers paying $100 now. So your demand at $100 won't equal your previous demand at $100, and you won't be sure what the "real" demand is, even at the numbers you've tested, much less at numbers you haven't.
Even if a genie granted your wish and gave you today's demand curve, it would soon change shape the way prices in the stock market move around. If you could predict the future shape of your demand curve, you could just go into fulltime investing in the stock market and make a killing.
I hope this helps make it clear why you can't make it clear.