ECONOMICS FOR MANAGERS

Elasticity of Demand and its role

in Managerial decision making
1. PRICE DISTRIBUTION

Price Distribution
1. Elastic – Same Price
2. Inelastic – Imposes higher price.
2. PUBLIC UTILITY PRICING

Price discrimination is observed with monopolist’s in the public

utility services:
1. Water Supply
2. Railways
3. Postal Services
3. JOINT SUPPLY

Goods supplied jointly is termed as Joint Supply according to its

demand. Example:
1. Demand for Car and Petrol
2. Wool, Leather and Mutton
3. Coconut, Coconut oil, Coir, Shell
4. USE OF MACHINES

• Demand for the goods will vary from time to time. In few cases
the demand will be:
(a) Elastic: Seasonal goods, Luxury goods.
(b) Inelastic: Basic needs.
5. FACTOR PRICING

• The factor pricing for product will be higher – In cases of

inelastic demand
• Factor wages for labour – Demand for wages is observed.
6. TAXATION

1. Inelastic demand – Tax burden should be borne by consumers.

Example Government imposing tax for the inelastic demand.
2. Elastic demand – The tax burden should be borne by
producers. In order to retain the consumers and also for the
available competition.
Thank You