Question 23
ElasticityElasticity of demand is an effective tool in the hands of a producer in that it enables him
- A.raise his profits and lower his costs
- B.discourage buyers from cheating
- C.determine what he will produce
- D.set his price to maximize his profit
Show the answer and explanation
Answer: D (set his price to maximize his profit)
Explanation
Knowing how buyers react to price changes tells the producer whether raising or lowering price will increase revenue and profit.