Question

Explain the Importance of linear elasticity of demand in consideration of different variables in production process and pricing

Answer 1

The linear elasticity of demand used to find the change price respect to the quantity demanded and this tells us the fact that if the demand is inelastic then price can be increased to gain more profit and if its elastic price has to be reduced to increase the profit level. For this demand curve and the elasticity of demand gives us a brief insight of what should be the price to attain maximum benefit out of it and what should be the quantity that has to be supplied as well and the details of the quantity to be produced lies in the various variables of factors of production on the whole.