what is the significance of price elasticity of demand to a producer.?
Answers
Answer:
" Elasticity is an important economic measure, particularly for the sellers of goods or services, because it indicates how much of a good or service buyers consume when the price changes. When a product is elastic, a change in price quickly results in a change in the quantity demanded. "
Answer:
The answer to the question is explained below:
Explanation:
Supply and Demand are both related to each other, so both supply and demand play a role for a producer.
But for the producer, the elasticity of supply is more important. If demand for a product increases it depends on whether the supply is elastic or not: if the supply is elastic, the price will increase only slightly and quantity will increase strongly.
if supply is inelastic, the price will increase strength and the quantity therefore only slightly.
supply usually is elastic among other reasons when there is the spare capacity or stocks available
supply usually is inelastic among other reasons when the firm is operating close to full capacity and has low levels of stock.
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