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
Q. Implications for the shape of cost function? A cost function is also a mathematical relationship, one which relates the expenses an organisation incurs on the quantity of ou

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

types of capital budgeting

The Circular Flow of Income and Expenditure This is an economic model illustrating the flow of payments and receipts between domestic firms and domestic households. The househo

Investment   Investment is the process of increasing the productive capital stock of a country, or can be defined as the production of goods not for immediate consumption.  T

Keynes Theory Keynes views about trade cycle entitled notes on the trade cycle of his classic the general theory of employment interest and money published in 1936. Although K

Factors influencing Supply Curve State of technology     There is a direct relationship between supply and technology.  Improved technology results in more supply as with

a) The following would most likely shift a production possibilities curve to the right? b) Money should not be considered an economic resource ? c)  Which of the following is

Q. What is Marketing Economies? They are allied with selling of the product of the firm. They arise from advertising economies. Because advertising expenses increase less than

Using the same simple macro model we developed in Module 2: a.  Show what will happen to national income (GDP) if the administration implements another $100 (billion) stimulus s