The price
elasticity refers to the degree of responsiveness of demand as a result of a change in
price.
The price elasticity of demand is important to firms because it helps
them in pricing their products. The firm needs to know whether their product has an elastic or
inelastic demand.
A product with elastic demand is more responsive to a
change in price. Such goods have numerous substitutes; therefore, the consumer can go for
another brand if their favorite company is charging more for the product. If the firm finds out
that their good has elastic demand, they might try to differentiate the...
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