Question

Examine the role of price elasticity of demand in decision-making of a firm.​

Answer 1

Answer:

The concept of elasticity of demand plays a crucial role in the pricing decisions of the business firms and the Government when it regulates prices. The concept of price elasticity is also important in judging the effect of devaluation or depreciation of a currency on its export earnings.

Answer 2

The role of price elasticity of demand in the decision-making of a firm. is as follows:

• The concept of elasticity of demand is important in pricing decisions made by businesses and in price regulation by the government.
• The idea of price elasticity is also useful in determining the impact of a currency's depreciation or devaluation on its export revenues.
• When it comes to determining how much to charge for a product, companies consider the price elasticity of demand.
• This is because, depending on the coeffi­cient of price elasticity, a change in the price of a product will result in a change in the quantity desired.