thevedprakash/retailpriceoptimization

Machine Learning Project for Retail Price Optimization

RetailPriceOptimization

Machine Learning Project for Retail Price Optimization

Introduction to Price Optimization Pricing a product is a crucial aspect of any business. A lot of thought process is put into it. There are different strategies to estimate prices for different kinds of products. There are products whose sales are pretty sensitive to their costs, and as such, a slight change in their price can lead to a noticeable difference in their sales. At the same time, there are also products whose sales are not much affected by their worth - these tend to be luxury items or necessities (like certain medicines).

Price elasticity of demand (EPD), or elasticity, is the degree to which the compelling desire for something changes as its price changes. In general, people desire things less as those things become more expensive. However, for some products, the customers’ desire could drop sharply even with a bit of price increase, and for other products, it could stay almost the same even with a hefty price increase. Economists use the term elasticity to denote this sensitivity of sales to price fluctuations. More precisely, price elasticity gives the percentage change in quantity demanded when there is a one percent increase in price, holding everything else constant.