What is mean elasticity in SAP SCM-APO-FCS - Demand Planning?

SAP Term: mean elasticity

• Component: SCM-APO-FCS

• Component Name: Demand Planning

• Description: Elasticity measures the effect of a 1 percent change in an explanatory variable on the dependent variable. This is calculated as the percentage change in Y the dependent variable divided by the percentage change in X the explanatory or independent variable. Elasticities tend to differ when measured at different points on the regression line. The mean elasticity is the mean average of the elasticities at these different points. Elasticities are useful because they are unit-free. This means that they provide a more accessible means of interpreting and explaining the effects of causal variables. A high elasticity indicates that the dependent variable is highly responsive to changes in the explanatory variable.

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• Key Concepts: 
  Mean elasticity is a measure of the responsiveness of demand for a product to changes in its price. It is calculated by dividing the percentage change in demand by the percentage change in price. In SAP SCM-APO-FCS Demand Planning, mean elasticity is used to determine the optimal price for a product. 
  
  How to use it: 
  Mean elasticity can be used to determine the optimal price for a product. To do this, the user must first calculate the mean elasticity for the product. This can be done by dividing the percentage change in demand by the percentage change in price. Once the mean elasticity has been calculated, the user can then use it to determine the optimal price for the product. 
  
  Tips & Tricks: 
  When calculating mean elasticity, it is important to consider both short-term and long-term effects. Short-term effects may be more immediate, but long-term effects may have a greater impact on demand and pricing. Additionally, it is important to consider external factors such as competition and market conditions when determining the optimal price for a product. 
  
  Related Information: 
  Mean elasticity is closely related to other measures of demand such as price sensitivity and price elasticity. Price sensitivity measures how sensitive demand is to changes in price, while price elasticity measures how much demand changes when prices change. Additionally, mean elasticity can be used in conjunction with other pricing strategies such as cost-plus pricing and value-based pricing.