# How a manager can use the concept of price elasticity of demand

For constant elasticity demand functions you will need to use excel or a scientific calculator to predict unit sales resulting from a new unit price the formula is: q = kp e q = kp e where e is the price elasticity of demand and k is a constant. The concept of elasticity • • • • sellers are manually expected to hope for more demand for their products higher revenues the buyer, ever anxious in getting the best value for his money the same predicament as the seller what is elasticity changes in price may or may not affect the demand or supply of any good or service. Price elasticity of demand measures the responsiveness of quantity demanded for a product to a change in price it is one of the most important concepts in business, particularly when making decisions about pricing and the rest of the marketing mix.

To what extent a producer can shift the burden of indirect tax to the buyers by increasing price of his product depends upon the degree of elasticity of demand advertisements: if the demand is inelastic the larger part of the indirect tax can be shifted upon buyers by increasing price. Price elasticity of demand can be used to answer the following types of questions: the concept of price elasticity of demand also helps us to explain the so . According to the law of demand: the lower the price the more product is bought but consumer response to changes in price can vary significantly from product to product economists measure the response (sensitivity) of consumers to changes in product prices, using the concept of price elasticitythe .

Price elasticity of demand can also be used in the taxation policy in order to gain high tax revenue from the citizens one of the ways would be for the government to raise tax revenue in commodities which are price inelastic. Concept of price elasticity of demand the price elasticity of demand measures the degree of responsiveness of quantity demanded for a certain commodity to the change in its price. Its product has perfect elasticity of demand, and it cannot increase its price business firms also realize that they can charge higher prices with a limited reduction in demand only in the short run.

Price elasticity of demand example questions • can the price-elasticity of demand be calculated for either good in order to calculate ped we need two (quantity . Business owners could then use the information to determine the price ranges for their entire product line references (6) quickmba: price elasticity of demand. Point elasticity of demand can be measured with complex statements as well as simple formulas we use simple formula to understand the concept the concept of point elasticity is used when we want to know relative price elasticity of demand at a given point on the demand curve to make some decisions about price variation. Price elasticity of demand is the measure of the percent change in the quantity of a good demanded divided by the percent change in the price of that good it is the term economists use to .

## How a manager can use the concept of price elasticity of demand

Price elasticity of demand is a measure used to show the responsiveness, the concept of elasticity has an extraordinarily wide range of applications in economics. The cross-elasticity of demand is defined as the proportionate change in the quantity demanded of x resulting from a proportionate change in the price of y symbolically we have the sign of the cross-elasticity is negative if x and y are complementary goods, and positive if x and y are substitutes. The concept of price elasticity of demand is important for formulating government policies, especially the taxation policy government can impose higher taxes on goods with inelastic demand, whereas, low rates of taxes are imposed on commodities with elastic demand.

Concepts of demand, supply and elasticity solutions explain the concepts of price elasticity of demand management information systems. - to study whether kellogg’s corn flakes is a product with price elastic of demand or price inelastic of demand, the following are some of the vital determinants that can be relied on: determinants that affect demand of elasticity a) number of availability of substitute in general, the bigger the number of substitute goods that are available .

Explain the concept of elasticity of demand and discuss the factors that determine elasticity of demand distinguish between price elasticity, inco fair use policy. The factors of production which have inelastic demand can obtain a higher price in the market then those which have elastic demand this concept explains the reason of variation in factor pricing relevant articles:. Maybe such use of elasticity of demand is a gauging technique that can be applied in the office, before or after hiring if products fly off the supermarket shelves after a steep price cut, it may reasonably be suspected, if not concluded, that we, as consumers, are very sensitive to changes in price for those specific items. When to use firm-level versus industry-level price elasticity of demand own-price elasticity reflects the extent to which customers have substitutes for the product (or service) that you sell a high price elasticity means that your customers can easily switch to other products if you raise your price.