Elasticity of demand affects managerial decisions because the demand of a product changes with the wrong business decision. Managers must be careful about what they choose to do with their products.
role of price elasticity of demand in managerial decisions
The price elasticity of demand affects a firm's pricing decisions by determining the optimal profit margin. Price elasticity of demand describes the rate of change of demand in response to a change in price. The higher it is, the higher demand changes in respond to price; lower means very little change. For a good with low elasticity, it is easier to profit off marking-up the price because demand falls little in response to a price increase. For a high elasticity, prices should approach equilibrium because straying from equilibrium results in a higher change in demand than in price.
It help the management to analyze the change in prise of the products
Demand, perceived value, overall reputation
An increase in population
role of price elasticity of demand in managerial decisions
The price elasticity of demand affects a firm's pricing decisions by determining the optimal profit margin. Price elasticity of demand describes the rate of change of demand in response to a change in price. The higher it is, the higher demand changes in respond to price; lower means very little change. For a good with low elasticity, it is easier to profit off marking-up the price because demand falls little in response to a price increase. For a high elasticity, prices should approach equilibrium because straying from equilibrium results in a higher change in demand than in price.
It help the management to analyze the change in prise of the products
Demand, perceived value, overall reputation
An increase in population
Increase in the population.
Elasticity of demand will help managers determine what behaviors affect customer's buying behavior. Price elasticity will tell managers whether they can change the price of products or not.
There are plenty of factors affecting elasticity of demand including climate of the area. Other factors that effect elasticity of demand include supply and group of people buying.
Elasticity of demand measures how much demand for a product will change if the price of that product is changed. Something highly elastic will be greatly affected by price changes (something like a hotdog for example, if a vendor raises his price then demand will drop because people can go elsewhere-demand is elastic). So management must be aware of how consumers will react to price changes. Normally, lowering the price of a good will bring in more customers if the demand for that good is elastic. If it is inelastic, then a lower price will not increase demand much.
Because elasticity means when the demand is changing. a subsitute consumer in choice of theory. the substiture affects elasticity is it changes over time. substitute is choice and elasticity is demand. put those together and you have a fair deal with your money.
Because elasticity means when the demand is changing. a subsitute consumer in choice of theory. the substiture affects elasticity is it changes over time. substitute is choice and elasticity is demand. put those together and you have a fair deal with your money.
1)price elasticity of demand 2)income elasticity of demand 3)cross elasticity of demand