Question

how would a business manager apply the concept of "price elasticity of demand" in an organization?

Answer 1

Price elasticity of product measures responsiveness to buy it after change in prices.

For example when relaince Jio entered the market the data and Calling prices of Telecommunications sector in 2016 dramatically reduced to 103 INR from 210INR per month and caused massive disruption and highest subscriber addition growth as well as exponential consumption volume. This is classic case of elastic demand where decrease in prices caused huge variation or increase in consumption and buying behaviour .

Hence as business manager it can be of great use to understand customers growth pattern depending upon pricing mechanisms and hence drive maximum profits or maximum market share with respect to changes in prices. Hence managers tend to increase or decrease prices to bring wholesome drastic changes in consumption behaviour and thus maximise profit in short run.