The conversation between human and AI assistant.
How do you measure elasticity of demand?
Interesting. How do businesses use elasticity of demand in their decision making?
Businesses use elasticity of demand to make pricing decisions. If the demand for a good or service is highly elastic, meaning that a small change in price will lead to a larger change in quantity demanded, businesses may choose to lower prices to increase sales. On the other hand, if the demand is highly inelastic, meaning that a change in price has little effect on the quantity demanded, businesses may choose to raise prices to increase profits.