Another objective to be achieved through price discounting is that of increasing sales revenue and thus be able to solve the financial difficulties facing a firm. This is applicable for both small and big firms in which the prices are reduced; sales revenue increased positively affecting the profits. However, the biggest challenge is the case of perfect competition in which as one of the companies decides to reduce prices to attract more customers, the competitors will be encouraged to follow suit (Campbell, 2002).
It is also impossible to reduce prices in cases where price elasticity of demand is inelastic. There are some products whose quantity of purchases cannot be increased because they are taken on specified amounts. For instance, salt is a necessity but can only be taken at some specified amounts such that it purchases cannot be increased irrespective of the reduction in prices.
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