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Why is it benificial to buy stock of companies that are selling products with elastic demand?

Why is it benificial to buy stock of companies that are selling products with elastic demand?

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Answer #1

Elastic demand for the product means that if the company decreases the price of its product by let's assume 1%, then the percentage increase in demand for it's product will be more than 1% which means that the company will be able to increase the demand for its good and get higher revenue by lowering the price.On the other hand,if the demand for a good is inelastic,then lowering its price by again let's assume 1%,will either increase the demand by less than 1% or will have very little effect on demand in which case,the company revenue will decrease.

Since these companies with elastic demand for its products will do well so, their stock will be highly valuable therefore it is beneficial to buy stock of such companies.

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