ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Elastic demand will mean that when price falls, demand will increase by a greater percentage than the price decreased. This means an increase in revenue. Inelastic demand will mean that when price increases, demand will fall by a smaller percentage than the price increased.

Detailed explanation-2: -The price elasticity of a product describes how sensitive suppliers and buyers are to changes in price. It doesn’t change in relation to supply and demand, but it defines the slope of each curve. A product with high price elasticity of demand will see demand fall sharply when prices rise.

Detailed explanation-3: -Using Elasticity for Pricing Decisions For elastic products, reduce prices to drive more sales volume. This will also improve your price perception in the market. With inelastic products, increase your prices to drive higher margins with limited impact on units sold.

Detailed explanation-4: -If demand is elastic, then a price increase reduces the total revenue. When the price increases, then the demand falls by a considerable percentage. Then, total revenue starts moving in contradictory directions. Therefore, total income declines when the price of any commodity rises.