Price elasticity and the product life cycle
The price elasticity will tend to vary at each stage of the product life cycle.
Figure 4 Product life cycle and elasticity
In the growth phase of the product life cycle, the product will tend to be fairly inelastic. This is because of the nature of the demand. People buying at this stage will tend to be 'innovators' and they are prepared to take risks with new products and are willing to pay a high price to have the latest technology.
However, as the product moves towards maturity, the elasticity will increase. The amount of competition will increase and the increasing number of substitutes will make consumers more price sensitive. The nature of the consumers will also change and they are likely to be more motivated to buy by factors like price, functionality and reliability.
