USES OF PED

Question 1

Use formulating price strategies- If PED is calculated and demand is found to be elastic what is a viable option?

Answer 1

A viable option that can be undertaken is to lower prices as this would increase consumer expenditure on the product and thus increase the firm’s revenue

Question 2

If the demand is found to be priced inelastic….

Answer 2

Then the business should increase the price of a product in order to increase sales revenue

Question 3

If demand is found to be unitary…

Answer 3

It would be obvious to the business manager that price changes would not affect consumer’s expenditure, and thus a firm’s total revenue

Question 4

What are the two uses of PED

Answer 4

Useful to government taxation authorities in setting taxes on goods and services
Use formulating price strategies

Question 5

What should be done to increase taxation revenue

Answer 5

Taxes on good that have an elastic demand should be reduced while those goods which have an inelastic demand should be subjected to higher taxes