Answer to Question #216378 in Marketing for ismail khan

Question

Explain if the demand for a product is highly elastic, the company can easily change its prices. True or False? Explain it with a good example? 

Answer 1

Elastic demand is when the price of goods or services has a big effect on the buyer's demand. However, if the company raises the price of the elastic product the demand will dramatically drop since the item has many alternatives, and customers may even decide not to purchase until the price decrease, on the other hand when the price decrease the demand will be very high. Therefore the price change may not apply to elastic products, for the company to retain the customers they also have to maintain the price or drop it even more to attract more buyers.

Examples of elastic goods are clothing, as long as people cannot live without dressings, there are varieties in the market if the industries for new clothe decides to raise the price, them people will shift to a second-hand store that offers quality used clothes at a lower price.