1. Important in Taxation Policy
The concept of the price elasticity of demand has very practical advantages in the taxes collection. The finance minister sees the price elasticity of demand of certain goods. If the price elasticity of demand for a good is inelastic then the taxes collection from that goods are more than compare to those goods whose price elasticity of demand is elastic.
2. Price Discrimination by the Monopolist
For profit maximization, a monopolist always trying to fixed different prices for the same good with different customers. For inelastic customer monopolist charge high price while for elastic demander charge low price to increase profit by selling more goods.
3. Important to Businessmen
The concept of price elasticity of demand is very important to businessmen. when the price elasticity of demand is elastic then they trying to increase sales by lowering the price but when the price elasticity of demand is inelastic than they are in position to increase the prices of those goods to maximize the profit.
4. Uses in International Trade
The term of trade between two countries are based on the price elasticity of demand of the goods.
The concept of the price elasticity of demand has very practical advantages in the taxes collection. The finance minister sees the price elasticity of demand of certain goods. If the price elasticity of demand for a good is inelastic then the taxes collection from that goods are more than compare to those goods whose price elasticity of demand is elastic.
2. Price Discrimination by the Monopolist
For profit maximization, a monopolist always trying to fixed different prices for the same good with different customers. For inelastic customer monopolist charge high price while for elastic demander charge low price to increase profit by selling more goods.
3. Important to Businessmen
The concept of price elasticity of demand is very important to businessmen. when the price elasticity of demand is elastic then they trying to increase sales by lowering the price but when the price elasticity of demand is inelastic than they are in position to increase the prices of those goods to maximize the profit.
4. Uses in International Trade
The term of trade between two countries are based on the price elasticity of demand of the goods.
5. Guidelines to the Producer
The price elasticity of demand gives a guidelines to the producer. If the price elasticity of demand for certain goods are elastic than the producer are trying to do advertising for that goods to increase the sales and maximize the profit.
6. Factor Pricing
Those factors which demand is inelastic then their prices will be high while in case of elastic demand than their prices will be low.
The price elasticity of demand gives a guidelines to the producer. If the price elasticity of demand for certain goods are elastic than the producer are trying to do advertising for that goods to increase the sales and maximize the profit.
6. Factor Pricing
Those factors which demand is inelastic then their prices will be high while in case of elastic demand than their prices will be low.
7. Determination of the foreign exchange rate
When the demand for a country currency is high then the value of that currency will be greater and it all depends on the country products. Those products which are exporting to other countries.
When the demand for a country currency is high then the value of that currency will be greater and it all depends on the country products. Those products which are exporting to other countries.
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