Question : The concept of elasticity is important for businesses to determine:
Option 1: The optimal pricing strategy.
Option 2: The advertising budget.
Option 3: The cost of production.
Option 4: The market share.
Correct Answer: The optimal pricing strategy.
Solution : The correct answer is (a) The optimal pricing strategy.
Elasticity provides crucial information to businesses regarding how responsive consumers are to changes in price. By understanding the price elasticity of demand for their products, businesses can make informed decisions about their pricing strategy. Specifically, they can assess the impact of price changes on the quantity demanded and, consequently, on their total revenue.
If demand is elastic (elasticity greater than 1), a decrease in price may lead to a more than proportionate increase in quantity demanded, resulting in increased total revenue. On the other hand, if demand is inelastic (elasticity less than 1), a price increase may result in a less than proportionate decrease in quantity demanded, potentially increasing total revenue.
Therefore, by considering the concept of elasticity, businesses can make more accurate pricing decisions and determine the optimal pricing strategy that maximizes their revenue and profitability.
Question : The concept of income elasticity of demand is important for businesses to understand:
Option 1: The impact of inflation on consumer purchasing power.
Option 2: The relationship between advertising expenditure and sales.
Option 3: The responsiveness of demand to changes in consumer income.
Option 4: The optimal pricing strategy for a given income level.
Question : Which of the following is an example of a marketing channel?
Option 1: Product design
Option 2: Pricing strategy
Option 3: Advertising campaign
Option 4: Distribution network
Question : Which of the following is an example of a market research method?
Option 1: Product pricing
Option 2: Sales forecasting
Option 3: Customer surveys
Option 4: Advertising campaign development
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