Question

Think of three goods for which the demand is inelastic with respect to price. Do these goods ever go on sale? Does understanding the relationship between elasticity and total revenue help you understand why some goods go on sale and others don’t? Share your thoughts.

Answer 1

Goods such as Medicine, Food grains, water, gas, clothing, Tobacco etc.

No these goods never go on sale.

In case of inelastic goods a reduction in price reduces the total revenue while an increase in price increases their total revenue.

In case of elastic goods a decrease in price increases the total revenue and increase in price increases the total revenue.

Therefore, elastic goods go on sale that is they are sold at a discounted price. This increases the total revenue of the company.

If inelastic goods will go on sale then the total revenue of the company will decline. Therefore, they are never put on sale.

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