An analysis of the retail price elasticity of demand for a leading fuel company
Abstract
In this paper the case that the retail petrol elasticity of demand within South Africa is
becoming more elastic has been argued, in order to assist fuel companies with future
strategic decision-making. The dissertation addresses the market forces that
influence elasticity of demand and the determinants for elasticity of demand.
Research has been done on the analysis of the retail price elasticity of demand for
one of the leading petrol companies in South Africa.
The author has provided a theoretical overview of some of the different market
forces as well as a summary of selected prior studies that were done on price
elasticity of demand for petrol. Empirical research has been done by means of a
survey questionnaire that was designed for the purposes of this study. The main
determinants of price elasticity of demand for petrol as well as the impact that these
determinants have on petrol elasticity of demand have been investigated as part of
the empirical study. The results from the statistical analyses have been used to
conclude if the petrol market is elastic within South Africa.
The empirical research shows that consumers are changing their lifestyles related to
the usage of petrol in order to reduce money spent on petrol purchase. The main
variables that consumers consider when buying petrol, which include, price, location,
price and brand are also analysed as part of the results.
The study also concludes that at R10 per liter for petrol, consumers become
absolutely price sensitive.
The empirical research of this study has shown that even though it is evident that
there are elements of elasticity creeping into the market for petrol demand, the
study's outcome is inconclusive to deem the entire South African petrol market
elastic.
Further research needs to be conducted to obtain conclusive results of retail price
elasticity in South Africa.