Question

How does global economic competition affect the price elasticity of demand in the domestic market and decisions related to the strategy a firm uses to compete?

Answer 1

Global Economic competition help to increase the number of products for domestic consumers. Now consumers can make a choice between domestic products and foreign products. Now foreign products can be easily substituted for domestic products. thus, there is intense pressure on domestic firms to reduce prices and compete with cheaper products from the rest of the world.

Thus, such competition makes domestic demand more price elastic. Now consumers can not be exploited by charging higher prices.