Elasticity (economics)
Applications

For enterprise, the concept of elasticity also can be applied for pricing strategy. At one hand a businessman has to calculate as if reducing price will necessarily increasing the demand of their products, or will it not be necessary so and resolving a lost for the company At the other hand, enterprise have to consider whether Increasing price and cutting production quantity led to greater revenue. To answer that, it is suggested that if the demand of that product is elastic enough, it is profitable for enterprises to cut price and let the demand to increase over time. But in other hand if the price is inelastic, it is profitable to cut the quantity of production and let the price to rise, because as the product is inelastic enough, so consumer have no alternative to purchase other type of product or services to replace it. Though it is clear that the enterprise should not let their product price to pass by that inelasticity threshold, if so, then the product will be subject to price elasticity and be affected by declining demand over time.
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