Explain the
role of supply and demand in determining price
- supply and demand of a product majorly determine the price of
any product
- In absence of demand, companies are forced to reduce price and
give discounts in order to lure customers and increase sales
- In case of abundant demands, companies charge a surge price in
order to supply products as customers are willing to pay any amount
for products
- An efficient supply model of company can deliver goods faster
and hence companies charge more for these services
Also, explain
the concepts of elastic and inelastic demand. Why should managers
understand these concepts?
Elastic
demand
- Elastic demand is when price or other factors have a big effect
on the quantity
- It is defined as demand that increases or decreases as the
price of an item goes down or up
Inelastic
demand
- Demand whose percentage change is less than a percentage change
in price
- Inelastic demand is the economic idea that the demand for a
product does not change relative to changes in that product's
price.
Managers should
understand these concepts, because-
- To formulate the strategies of the products accordingly
- To target the customers accordingly