Question

Briefly explain two reasons why price elasticity of demand might be useful to a business
when making pricing decisions.

Answer 1

Answer:

The two reasons are:

✒ Knowing the elasticity of your products is key to determining how customers will react to price changes. Equipped with that information, there are two strategic pricing moves you can make to increase profits.

★ For elastic products, reduce prices to drive more sales volume. This will also improve your price perception in the market.

★ With inelastic products, increase your prices to drive higher margins with limited impact on units sold.

✒ The following should illustrate how powerful these moves can be using two items with similar prices, margin and quantities, but different elasticities.

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Explanation:

HOPE IT HELP'S.............

Answer 2

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• For elastic products, reduce prices to drive more sales volume.
• This will also improve your price perception in the market.
• With inelastic products, increase your prices to drive higher margins with limited impact on units sold.