Answer to Question #230454 in Microeconomics for Suru

Question

Importance of elasticity of demand

Answer 1

i.                    Elasticity of demand is vital in the determination of the levels of output.

ii.                  Elasticity of demand is equally important in the determination and fixing of price for products.

iii.                 Elasticity of demand also helps in the forecasting for various goods and services.

iv.                It also helps in the determining the price for various factors of production.

v.                  Demand elasticity helps monopolists in determining the prices of the products they produce and sell to the market.