Answer to Question #253201 in Economics for Hina Gurung

Question

Discuss the ways in which the concept of the elasticity of demand might be of value to the managing director of an international supermarket chain.

Answer 1

The managing director of an international supermarket chain should take into account the following concepts of demand elasticity:

1) price elasticity - the main part of goods and products assortment should be formed by the products with low price elasticity, such as bread, eggs, flour which people need regardless of price.

2) income elasticity - opening of new branches and supermarkets have to be done accordingly to changes of income in a particular region or community because customers with reduced income won't be able to provide a high demand;

3) cross elasticity - the managing director should take into account the demand in similar supermarkets in a chosen area, demand for particular groups of products.