Answer to Question #216437 in Marketing for Raja

Question

Briefly explain if the demand for a product is highly elastic the company can easily change their prices. True or False? Explain it with proper example? 

Answer 1

False. For high elastic products, the firm cannot easily change their prices because such change can force the firm out of the market. Highly elastic demand means that a small change in price alters the quantity demanded drastically. The consumers will shift to the substitutes and the sales fall. An example is sony TV and LG TV set. If the price of sony TV increases, then consumers will start buying LG TV sets which will then push Sony TV sets out of the market.