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Online Aptitude Test | Previous Years Questions Papers

Business Decisions

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Reasoning Questions, IQ Test, Quiz, Online Aptitude Test...
The concept of elasticity of demand plays an important role in taking various decisions regarding prices and output. For instance, in deciding
whether to increase the price or not the firm should have an idea about price elasticity of demand for the product and its substitutes and complements.
Raising price will be beneficial only if the demand for its products is inelastic as the increase in price will raise total revenue.

Moreover, raising price will be advisable if the elasticity of demand for its substitues is low because otherwise consumers will shift to the
consumption of these substitutes as the firm raises the price of its product. Similarly, business firms should have an idea of income elasticity
of demand while deciding to undertake additional capacity. They would find it profitable to increase the production capacity of those products which
have a high income elasticity of demand.So Visit Our Website and get all Aptitude Papers and all types of Books online.


Importance to Monopolist

Get Any Types Previous Years Questions Papers Available Here. A monopolist normally pursues the policy of price discrimination, i.e., charging different prices

from different consumers. Knowledge of price elasticity of demand or his product by different consumers would be useful to him. He would charge higher prices from

those consumers who have inelastic demand and lower prices from those consumers who have elastic demand for the product sold by the monopolist.

Determination of Factor Prices

Elasticity of demand is important in determining the factor prices like wagas. For eg., the bargaining power of the trade union will depend upon the
elasticity of demand for labour. If the demand for labour and the demand for the product which labour is producing is elastic, and attempt by the trade
unions to increase wages will fail.Get All Types Placement Papers..

The rise in wagas will increase the price of the commodity produces by the workers and it will cause a large decrease in the demand for the product
and consequently, a large decrease in demand for workers. Thus, the attempt by the trade unions to raise wagas will lead to unemployment of the
workers. But if the demand for labour is inelastic, the trade unions can bargain for higher wages..http://www.padhle.com