Respuesta :
1.Price elasticity of demand affects a business's ability to increase the price of a product. Elastic goods are more sensitive to increases in price, while inelastic goods are less sensitive.
2.
Income elasticity measures the responsiveness of demand to a change in income. Cross price elasticity of demand measures the responsiveness of quantity demanded to a change in price of another good. Demand elasticity of make pricing decision will define how the market will react to changes in price.
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- The 'elasticity of demand' is described as the change or alteration in the demand of a specific commodity in response to change or alteration in its price in the market.
- The businesses or the production firms are directly affected by the demand elasticity as the decisions associated with the determination of the price and the quantity supplied are the result of alteration in the demand of that product.
- The consumer is central to the elasticity of demand as it is the change in his preference of quantity of a specific good as the product of alteration in its market price decides how elastic the demand is.
- The demand and price are inversely proportional to each other. The more the price, the lower the demand and vice versa. Therefore, the demand affects the pricing decisions accordingly.
- Similarly, the demand or purchasing decisions are also based on the change in the price of the commodities as the consumer divides his purchasing power as per the prices only.
- For example: If the price falls, the consumer would like to buy more while if it falls, he would reduce his demand except for the basic essential items.
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