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What is the importanve of elasticity of demand .

Answer» <html><body><p></p>Solution :The practical <a href="https://interviewquestions.tuteehub.com/tag/importance-1038031" style="font-weight:bold;" target="_blank" title="Click to know more about IMPORTANCE">IMPORTANCE</a> of `P.e_(D)` can be made clear with the help of following point., <br/> 1. Importance for a producer <br/> if demand for his product is inelastic, he will keep price high to earn maximum profit. <br/>if dd is elastic, he would fix a lower price. <br/> 2. Improtance to a monopolist <br/> The <a href="https://interviewquestions.tuteehub.com/tag/consumers-14615" style="font-weight:bold;" target="_blank" title="Click to know more about CONSUMERS">CONSUMERS</a> for whom deamand is inelastic, can be charged a higher price. <br/> the consumers for whom dd is elastic , can be charged relatively lower price. <br/> 3. Importance for formulating govt, policies. <br/> Government can impose higer taxes on goods with inelastic dd ( specially for <a href="https://interviewquestions.tuteehub.com/tag/rich-614275" style="font-weight:bold;" target="_blank" title="Click to know more about RICH">RICH</a> class so that burdento taxation falls on this class)<br/> low rate of taxes can be <a href="https://interviewquestions.tuteehub.com/tag/imposed-7324701" style="font-weight:bold;" target="_blank" title="Click to know more about IMPOSED">IMPOSED</a> on commodities which have elastic demand. <br/> 4. Useful in determination of factor pricing <br/> The factors having inelastic demand can obtain a higher price. <br/> Factors having elastic having elastic demand can obtain lower price. <br/> 5. Useful in international trade <br/> If demand for the good in other countries is inelastic, higher price can be fixed, <br/> If demand for the good in other countires is elastic the exporting <a href="https://interviewquestions.tuteehub.com/tag/country-936956" style="font-weight:bold;" target="_blank" title="Click to know more about COUNTRY">COUNTRY</a> will have to fix lower price.</body></html>


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