Question

One factor that might be evaluated is the elasticity of demand for different products and or services. How does an estimate of demand elasticity influence the operating costs of a company and affect projections of future yearly income?

Answer 1

Elasticity of demand is an important influence for the operating costs. The demand for the product in the market will have an inverse relation to the operating costs of a product.

If the demand for the product is high, the level of output will have to be increased. This increased level of output will increase efficiency and reduce the operating costs. The reduced operating costs will in turn increase the future projected income.

On the other hand if the demand for the product is low, the level of output will have to be decreased. This decreased level of output will decrease efficiency and increase the operating costs. The increased operating costs will in turn reduce future projected income.