Practical importance of knowledge-price elasticity of demand, Managerial Economics

Practical Importance of the knowledge of Price Elasticity of demand

The practical importance of the measures of elasticity of demand is to be appreciated in various ways:

  1. From the point of view of individual consumers who tend to spend limited income on commodities with less elastic demand.
  2. From the point of view of business person who need to know the effects that changes in price will have on the sales revenue. For instance, if they know that demand for their product is relatively inelastic then increasing prices might help them to increase revenue. If on the other hand they are aware that source of their products have a high price elasticity of demand they will be more cautious when considering price increases for fear of losing revenue.
  3. From the point of view of firms in who may attempt to change the price elasticity of demand for their product through advertising, packaging, better service and other services to improve or help maintain sales.
  4. From the point of view of business people who may also want to know the price elasticity of demand as purchasers of inputs for use in their business.
  5. From the point of view of governments in trying to estimate the yield of a prospective market tax.
  6. From the point of view of devaluation policy aimed at improving the balance of payments.
  7. From the point of view of the effectiveness of price control and deregulation of some industries.
  8. From the point of view of wage bargaining among workers and employers and the government when fixing minimum wage legislation.
  9. For purposes of regulating farm incomes and to predict consequences of bumper harvests of crops.
Posted Date: 11/27/2012 6:36:41 AM | Location : United States







Related Discussions:- Practical importance of knowledge-price elasticity of demand, Assignment Help, Ask Question on Practical importance of knowledge-price elasticity of demand, Get Answer, Expert's Help, Practical importance of knowledge-price elasticity of demand Discussions

Write discussion on Practical importance of knowledge-price elasticity of demand
Your posts are moderated
Related Questions

Explain cost output relationship with reference to: a.    Total fixed cost and output b.    Total variable cost  and output

The production function can have many uses. It can be used to compute least-cost factor combination for a given output or maximum output combination for a given cost. Knowledge of

Suppose that the government is the only provider of water. The market demand function reads D: Q(P) = 50 - 2P. The government''s total cost for producing water are described as fol

Indifference Curve Analysis In the 1930s a group of economists, including Sir John Hicks and sir Roy Allen, came to believe that cardinal measurement of utility was not necess


Explain the demand for a commodity The functional relationship between demand for a commodity and its various determinants may be expressed mathematically in terms of a demand

show how scarcity and opportunity cost are useful in decisionmaking

they manufacture a single product, specialty curry sauce. They are interested in developing 12 MONTH budget models and want to perform decision analysis on this model. Curryrus.com

Thinking about modifications in the model again: Go back to the original model again, but add a marginal propensity to invest, this is, suppose  that I = f ( i and Y). The MPI is d