How elasticity apply to the firms???

Luxuries companies such as GUCCI, LV, CHANEL and Burberry are competing and elastic demand is the way to evaluate their profits. Firms can increases the quantity demanded on their product by lowering the price. Example, if price of branded product (GUCCI) drops, the quantity demanded will increase. Inelastic demand occurs in goods and consumers will not pay attention on price even there is changes in price so firms can increase the price such as, Yeos, Pringles and Maggi.  Because of many companies are selling different goods, firm can’t exceeds the limit price. Unit elastic demand and perfectly inelastic demand are the aim for companies to get the highest profits and revenues from customers but this situation have obstacles due to competitors rising. Due to improvement in operating system from Apple and Samsung companies, Nokia, Sony Ericson and Motorola companies met perfectly elastic demand which recession occurs.

All daily newspapers in the United States between 1970 and 1975 and it shows that results the demand curve is consider a highly inelastic demand. During the six-year period studied indicated that there is a 50% increase in price  and only a 1.25% decrease in circulation. This means that if price of newspapers changes from 15 cent to 20 cents, the quantity demanded is considered as the same.

Written by

Elbin Wong Tze Bin