#Forbeginners

What is price elasticity of demand:

It measures how much the quantity demanded of a good changes when its price changes. If demand changes significantly with price, it is elastic; if demand changes little, it is inelastic.

What is price inlasticity of demand:

It means that demand stays almost the same even when the price changes. This usually happens with essential goods like food, fuel, and medicine.

The effects of price elasticity of demand:

• evenue Impact: If prices rise, demand drops significantly, reducing total revenue.

• Consumer Behavior: Buyers are sensitive to price changes and may switch to substitutes.

• Business Pricing Strategy: Companies must be careful with price increases to avoid losing customers.

• Market Competition: High elasticity means firms face strong competition, as customers can easily switch brands.

The effects of price inelasticity of demand:

• Revenue Stability: Businesses can raise prices without losing many customers, increasing total revenue.

• Consumer Necessity: People continue buying the product even if prices rise (e.g., fuel, medicine).

• Government Taxation: Governments may tax inelastic goods (like cigarettes or fuel) to generate revenue.

• Inflation Impact: If essential goods are inelastic, price hikes can lead to a higher cost of living.

THE END