Why elasticity concepts may have limited use to a firm?
1. Time lag between calculating elasticity figures and incorporating them into pricing decisions.
2. The values are often only estimates, not exact figures
3. Need to account for the cost of production as well since profit maximisation is assumed to be the main aim of the firm.
4. Lowering the price of the good to increase demand cannot be a long term strategy
5. Maintaining customer loyalty is a way to minimise fluctuations in the demand for a good.
0 comments:
Post a Comment