Relationship between price elasticity and profit

               People are price concern. So the demand for a good depending upon the price of the good and target market of that product. Suppose we want to introduce a high costly product in a low-income region then we won’t be able to make our market share where that same product can generate more revenue in a big city mall/area. So a proper cost needed for a proper market. Let suppose a product is there in the market at a certain price and we want to generate more revenue from that so we increase the price and there is definitely we find to see that a change in the demand of that product and this thing is called elastic characteristics of that product. When there is a small price change and there is a large change demand for the product that is called price-elastic product.

                           Price elasticity =% change in demand / %change in price

 

                So to generate more revenue in a price elastic product we should low the price. Let suppose a product is there in the market and also with the same feature another brand's same type of  product is present and that product is in demand so by lowering the price of the product we can generate more demand and more revenue also. For an inelastic product, we should raise the price to generate more revenue. The luxurious product belongs to this type of goods. Let take examples of super-cars, these are the inelastic product so as to generate more revenue we should increase the price. There is some variety of product is also the called unitary elastic, for this type of product holds the price constant.                                                                      

 

 

 

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