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
Hayek explaination Under a fractional reserves system, it is possible for the banking system to supply resources to entrepreneurs for investment in excess of resources that are

Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sensitive test equipment

“Managerial economics involves use of economic analysis to make business decisions involving the best use of a firm’s scarce resources” Explain the statement with suitable example.

Meaning The word inflation has at least four meanings. A persistent rise in the general level of prices, or alternatively a persistent falls in the value of money.

(i) Do the laws of economics still work today? (use the case discussed in class to answer this question or any other examples) (ii) Provide examples of three factors that can sh

Mark works for Maple Feel Inc., which exports maple syrup to Slovakia. Currently, he generates $60,000 a year of net revenues for the firm and his salary is $60,000 per year. Mark

Perfectly Inelastic (Zero Elastic) Supply Supply is said to be perfectly inelastic if the quantity supplied is constant at all prices.  The supply curve is a vertical straight

Features of Planned Economy The command economies relies exclusively on the state.  The government will decide what is made, how it is made, how much is made and how distribut

SHORT RUN OUTPUT AND PRICE In monopolistic competition, it's the product differentiation that permits its price without losing sales.  Due to brand loyalty consumers will c

MONEY MARKETS The expression "money markets" is used to refer to the set of institutions and individuals who are engaged in the borrowing and lending of large sums of money