IMPORTANCE OF ELASTICITY IN OUR TODAY’S LIFE
There is much more importance of the concept of elasticity in our life.
The firm which uses advertising to change prices uses the concept of elasticity of demand of its product.
Mostly firms set the prices of their product by viewing at the elasticity of demand of their product.
The government collects revenues by imposing taxes. The good tax imposed by the government on the products is one for which either demand is inelastic or the supply is inelastic.
So if the government wants to put tax burden on the consumers then it will choose the product to tax with low price elasticity of demand.
And if government wants to panelize the producers then it must choose the product with low price elasticity of supply. Virtual University