
Deriving your demand curve using exchange rate fluctuations - jkush
http://www.joelonsoftware.com/items/2007/04/24.html
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mojuba
You can't really vary the price of your product to carry such experiments, so
Joel found a way to do it indirectly. Just great.

The results are pretty much predictable though.

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Sam_Odio
_The results are pretty much predictable though._

Not at all. Almost every demand curve is downward sloping, yes, but that
doesn't mean every demand curve is the same.

If Joel's graph is accurate, and the Y axis starts at 0, this demand curve is
VERY interesting. It's one of the most elastic curves I've seen. A 15% drop in
price from 65 pounds to 55 leads to a 500% increase in volume. Of course the
data isn't perfect, this is assuming consumers will purchase at the same rates
as businesses.

If Joel wants to maximize profit, where profit = (Price-Marginal Cost) x
Volume - Fixed costs, then the ideal price should be around 55 pounds.

This makes sense. For software development firms, cheaper is usually better.
If you can reduce your price by X%, and increase your volume by more than X%,
then go for it. You want to do this because software firms almost always have
very low marginal costs (bandwidth), and very high fixed costs (development).

