Outline the important determinants of demand for automobiles. How are cross and income elasticity of demand relevant to Maruti’s managerial decisions?
Answers
Both cross and income elasticity are of great relevancy of the Maruti's managerial decision making as it helps for formulating better price strategy.
Explanation:
The three main determinants of automobile's demand are as follows:
1. Availability of close substitutes.
2. Importance of the cost of product in the budget.
3. Period of time in the consideration.
Income elasticity is used to measure the responsiveness of the total quantity demanded in order to change in income.
Cross elasticity is used to measure the responsiveness of the quantity that is demanded for a commodity in order to change the price of another commodities.
Both cross and income elasticity are of great relevancy of the Maruti's managerial decision making as it helps for formulating better price strategy.
Know more:
1. Distinguish between income elasticity of demand and cross elasticity of demand
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2. Explain the income and cross elasticity of demand.
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