Answer to Question #253179 in Economics of Enterprise for frieza

Question

Discuss whether knowledge of price elasticity of demand or price elasticity of supply is more useful for a car manufacturer. 

Answer 1

The knowledge of price elasticity of demand is more useful for a car manufacturer than knowledge of price elasticity of supply. This is because price elasticity of demand is what companies look to when establishing sales strategy. It focuses on consumer behavior in relation to changes in price. Price elasticity of supply is not much essential in this case because it focuses on producer behavior which is not as much significant as consumer behavior. For a car manufacturer, focus is on demand. The level of supply is determined by the quantity demanded.