Practicing Success
Under which of the following situations is a company NOT likely to fix a lower price for its product? |
When the competitiors has introduced a substitute product If the demand for a product is inelastic When the company wants to attain market share leadership When the demand for the product is low |
If the demand for a product is inelastic |
The price of a product is affected by the elasticity of demand of the product. The demand is said to be elastic if a relatively small change in price results in large change in the quantity demanded. Here numerically, the price elasticity is greater than one. In the case of inelastic demand, the total revenue increases when the price is increased and goes down when the price is reduced. If the demand of a product is inelastic, the firm is in a better position to fix higher prices. |