Skip to main content

How does the knowledge of elasticity help in the effectiveness of a business?

There are two kinds of elasticity that might be important to a business.  These are price elasticity of demand and cross elasticity of demand.


Price elasticity of demand measures how much the quantity demanded for a product will rise or fall if the price of that product changes.  This can be important information for a business.  Let us imagine that the demand for a given product is inelastic.  This means that the quantity demanded of...

There are two kinds of elasticity that might be important to a business.  These are price elasticity of demand and cross elasticity of demand.


Price elasticity of demand measures how much the quantity demanded for a product will rise or fall if the price of that product changes.  This can be important information for a business.  Let us imagine that the demand for a given product is inelastic.  This means that the quantity demanded of the product will not fall very much if its price rises.  In such a case, it makes sense for the business to raise the price of that product.  If it does so, its revenues will rise.  If, on the other hand, the demand for a product is elastic, it might make sense to lower the price of that product so that people will buy more and revenues will increase.


Cross elasticity of demand measures how much the demand for one product changes when the price of another product changes.  For example, when the price of one good goes down, the demand for its complements rises.  If a golf course lowers the price of its cart rentals, people might buy more rounds of golf.  If a business knows the cross elasticity of demand for its various products, it can operate more efficiently.  It can reduce the price of some items to increase demand for other items. 


In both of these ways, the knowledge of elasticity can increase a business’s effectiveness.

Comments

Post a Comment

Popular posts from this blog

What is the meaning of "juggling fiends" in Macbeth?

Macbeth is beginning to realize that the three witches have been deceiving him since he first encountered them. Like jugglers, they have kept changing their forecasts in order create confusion. This is particularly apparent when the Second Apparition they raise in Act IV,   Scene 1 tells him that no man of woman born can overcome him in hand-to-hand battle--and then Macbeth finds himself confronted by the one man he has been avoiding out of a... Macbeth is beginning to realize that the three witches have been deceiving him since he first encountered them. Like jugglers, they have kept changing their forecasts in order create confusion. This is particularly apparent when the Second Apparition they raise in Act IV,   Scene 1 tells him that no man of woman born can overcome him in hand-to-hand battle--and then Macbeth finds himself confronted by the one man he has been avoiding out of a sense of guilt, and that man tells him: Despair thy charm. And let the angel whom thou still hast serve...
Post a Comment
Read more

What are some external and internal conflicts that Montag has in Fahrenheit 451?

 Montag, the protagonist of Fahrenheit 451, faces both external and internal conflicts throughout the novel. Some examples of these conflicts are: External Conflicts: Conflict with the society: Montag lives in a society that prohibits books and critical thinking. He faces opposition from the government and the people who enforce this law. Montag struggles to come to terms with the fact that his society is based on censorship and control. Conflict with his wife: Montag's wife, Mildred, is completely absorbed in the shallow and meaningless entertainment provided by the government. Montag's growing dissatisfaction with his marriage adds to his external conflict. Conflict with the fire captain: Montag's superior, Captain Beatty, is the personification of the oppressive regime that Montag is fighting against. Montag's struggle against Beatty represents his external conflict with the government. Internal Conflicts: Conflict with his own beliefs: Montag, at the beginning of th...
Post a Comment
Read more

In A People's History of the United States, why does Howard Zinn feel that Wilson made a flimsy argument for entering World War I?

"War is the health of the state," the radical writer Randolph Bourne said, in the midst of the First World War. Indeed, as the nations of Europe went to war in 1914, the governments flourished, patriotism bloomed, class struggle was stilled, and young men died in frightful numbers on the battlefields-often for a hundred yards of land, a line of trenches. -- Chapter 14, Page 350, A People's History of the United States Howard Zinn outlines his arguments for why World War I was fought in the opening paragraph of Chapter 14 (referenced above). The nationalism that was created by the Great War benefited the elite political and financial leadership of the various countries involved. Socialism, which was gaining momentum in Europe, as was class struggle, took a backseat to mobilizing for war. Zinn believes that World War I was fought for the gain of the industrial capitalists of Europe in a competition for capital and resources. He states that humanity itself was punished by t...
Post a Comment
Read more