--%>
Assignment Help - homework help

Illustrates the significance of elasticity

Illustrates the significance of elasticity?

E

Expert

Verified

Significance of Elasticity is explained here with some important points:

The perception of elasticity of demand is more of practical importance:

1. Production: Producers usually decide their production level on the origin of demand for their product. Therefore elasticity of demand helps to fix the level of output.

2. Price fixation: Each seller under monopoly and imperfect competition has to take in account the elasticity of demand whereas fixing their price. When the demand for the product is inelastic then he can fix a higher price.

3. Distribution: Elasticity assists in the determination of rewards for factors of production. For illustration, when the demand for labour is inelastic, trade union can increase wages.

4. International trade: This perception helps in determining the terms of trade among two countries.
Terms of trade, means rate at that domestic commodity is exchanged for foreign commodities.

5. Public finance: It assists the government in formulating tax policies. To impose tax on a commodity, the government must take in consideration the demand elasticity.

6. Nationalization: Elasticity of demand assists the government to decide regarding nationalization of industries.

7. Price discrimination: A manufacture can fix a higher price for the product that have inelastic demand and lower price for product that have elastic demand.

8. Others: The notion elasticity of demand also assisting in taking other vital decision for example: finding out the price of joint product and take over decision.

   Related Questions in Managerial Economics

  • Q : Analysis of Costs and Revenue with

    Refer to below figure. Assume that the firm is currently producing Q2units. What occurs if this expands output to Q3units: w) Its profit raises by the size of the vertical distance df. x) this makes less profit. y) this incurs a loss. z) this wil

    		•
  • Q : Tax when price elasticity of

    When the ratio of the price elasticity of demand of a taxed good associate to its price elasticity of supply increases, tax is: (w) revenue will fall when tax rates are raised. (x) hikes will cause buyer's total outla

    		•
  • Q : Explain why firms may close in Short Run

    Val Alvarado, an accountant, quit his $80,000 year job and bought an existing laundry through its earlier owner, he was Ricky White. The lease has five years stayed and needs a monthly payment of $4,000. Val's explicit cost amounts to $3,000 per month more than his

  • Q : Determine loss in curve of profit or

    As is given figure below. Assume that the prevailing price is P1 and the firm is now producing its loss-minimizing quantity. Determine the area which shows the loss: w) P2deP1. x) P3cbP1. y) P3caP0

    		•
  • Q : Concept of derived demand The concept

    The concept of derived demand means that: (w) consumer demands for goods depend on the utilities received from their use. (x) firms’ demands for resources depend upon consumer demands for the goods produced. (y) governmental demands for social g

    		•
  • Q : Explain the assumptions of Law

    Explain the assumptions of Law Diminishing Returns.

    		•
  • Q : Illustrates the role of cost in pricing

    Illustrates the role of cost in pricing?

    		•
  • Q : Lower Wages in Wage Differentials

    Compared to men along with similar amounts of education or experience, women onto average earn: (1) higher wages. (2) similar wages. (3) lower wages. (4) There is no general pattern. Can someone explain/help me with best solution a

    		•
  • Q : What are the types of elasticity of

    What are the types of elasticity of demand?

    		•
  • Q : Wage Flexibility An assumption

    An assumption regarding purely competitive labor markets to make sure market clearing is which: (w) firms maximize profit. (x) individuals and households maximize utility. (y) wages and prices are flexible. (z) trade unions engage in collective bargai

    		•