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
Rationing of Credit As an instrument of credit control credit rationing was first employment by the bank of England toward the end of the eighteenth century when it imposed a c

Marginal utility approach The downward sloping nature of the demand curve can be explained by using the law of diminishing marginal utility .  For instance, consider a consum

Q. Production Planning in demand forecast period ? Long term production planning can assist the management in organising long term finances on practical terms and conditions. S

briefly explain oppurtunity cost in decision making?


What are the Methods of Managerial Economics The process of managerial economics deals with aspects of economics and tools of analysis, which are employed by business enterpri

TERMS OF TRADE The relation between the prices of a country's exports and the prices of its imports, represented arithmetically by taking the export index as a percentage of t

A firm producing hockey sticks has a production function given by X = 2 KL In the short-run, the firm's amount of capital equipment is fixed at K = 1000. The rental rate fo

Advantages a.           It is more equitable.  The broader shoulders are asked to carry the heavier burden. b.          It satisfies the canon of productivity as it yields

Oligopoly can be characterized as follows: Small Number of Sellers: There are more than one sellers of a product though; the number isn't so huge in order to produce perfect