Question

Explain the importance of elasticity of demand​

Answer 1

Answer:

ELASTICITY FOR MANAGERIAL DECISION MAKING

It is important to know the extent to which a percentage increase in unit price will affect the demand for a product. With elastic demand, total revenue will decrease if the price is raised. With inelastic demand, however, total revenue will increase if the price is raised.

Explanation:

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Answer 2

1:Elasticity of demand measures the ratio of the proportionate change in quantity demanded of a commodity to proportionate change in price. Concept of elasticity of demand is important to the government as it helps the government to formulate tax policies.

2:Price elasticity of demand is the change in demand of a product based on the increase or decrease of the price of that product. It is of significant importance to the government because it is used to determine the tax incidence of each product.

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