Examine the importance of the elasticity
Determination of sale policy for supper markets: Super Markets is a market where in a variety of goods are sold by a single organization. Though the difference grows in a slower pace, yet it makes an impact in the long run and that is how the use and consumption gets restricted to a great extent in UK.
A bumper crop instead of being a cause of prosperity may spell disaster, if the commodity has inelastic demand, particularly, when the produce is perishable.
As such consumptions of death threatening products like cigarettes can be handled well through the formulation of elasticity of demand in proportionate to prise determined y the government.
If demand for the product is elastic, then he will fix low price.
Importance of price elasticity of demand pdf
Keynes considered price elasticity of demand to be the most important contribution of Marshall. Demand elasticity is affected by three things: 1 availability of substitutes; 2 the urgency of need, and 3 the importance of the item in the customer's budget. Some of the areas are: 1. The importance of elasticity of demand maintained through rise in price is thus very appropriate in making the society free of abusive products, by adding specific taxes the government can well raise its price and can make it unaffordable. However, if the target is long term then the application of elasticity of demand is very appropriate. A country will benefit from international trade when: i it fixes lower price for exports items whose demand is price elastic and high price for those exports whose demand is inelastic ii the demand for imports should be inelastic for a fall in price and inelastic for arise in price. Economists are often interested in the price elasticity of demand, which measures the response of the quantity of an item purchased to a change in the item's price.
The approach forwards a structure under which the demands for cigarettes undergo changes, by the imposition of specific taxes over them. The basic concept of this paper is to examine the importance of the elasticity of demand by means of government decision to impose a specific tax on the buyers of cigarettes.
The price of a joint supply product is fixed high if its demand is inelastic and low price is fixed for that joint supply product whose demand is elastic. This paradox of poverty is the basis of regulation and control of farm products prices.
In Price Determination of Factors of Production 5. The products having more elastic demand are preferred by the businessmen.
Importance of elasticity of demand in business decisions
Such devaluation will make exports cheaper and imports dearer. Price elasticity of demand is a very important concept. It is an additional tax that has increases the price much more that the consumer can expect it to be. What is the Importance of Elasticity of Demand? These goods and services tend to be necessities. If the demand is inelastic, the terms of trade will be in favour of the seller country. Therefore, the organization is supposed to sell commodities at lower prices than charged by shopkeepers in the other bazars. By adding the specific tax the government can well restrict the use of cigarette in the society. What is the Importance of Elasticity of Demand? Price elasticity of demand is useful in the theory of price determination. Factors of production are paid according to their elasticity of demand.
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