Answer to Question #148193 in Microeconomics for theo

Question

As a Sales Manager, explain and illustrate why it is advisable to drop the price of a product in order to increase sales revenue when the product has elastic demand

Answer 1

For goods with elastic demand lowering the price can maximize long-term profit. For it generally attracts many customers and helps the business to increase it's sales

For example in above figure when the price is lowered from $40 to $36, the quantity demanded changes from 80 to 90 which is an increase in quantity demanded. Hence increasing the sales