Answer to Question #124677 in Microeconomics for Shaira Imtiaz

Question

How a firm might be able to change the elasticity of demand for its own good

Answer 1

Price affects the demand elasticity of a product or service. Changes in the price level of products cause a change in demand. If the demand for products in a firm is low, the firm may reduce its prices to increase demand. When the price decreases, it becomes affordable to consumers, thus increasing more sales. A firm may also package the goods in low quantities. A small quantity of a product sells at a low price. The lower the price, the more goods will be demanded. Firms can also focus on producing more elastic goods. Since they may not increase the price, they should generate more elastic products to sell more and thus increase revenues.