Identify one practical experience you have had in which the seller’s pricing and output strategy would benefit from knowing the price elasticity of demand. It can be a business you have worked in or a business you have interacted with as a customer. Include a description of the experience, whether you believe demand is price elastic or inelastic, and what implications the price elasticity has for the business’ pricing and output strategy.

 

Note: Recall that elasticity measures the degree of response to price changes. It will be true at every elasticity that consumers will purchase a smaller quantity at high prices. However, with high price elasticity (that is, when demand is price elastic), the purchase quantity will go down by a larger percent than the percent increase in price. In other words, consumers respond a lot to price changes when demand is price elastic.