Question

In the future when you are working as an entrepreneur, how will the concept of elasticity help your decision making?

Answer 1

Introduction:

Elasticity is a measure which is used to determine the responsiveness of a factor, or a variable when there is change in another variable. The elasticity of demand, and elasticity of supply are the most widely used measures in the market scenarios.

Explanation:

An entrepreneur refers to the person who is responsible for taking care, and managing the business. The entrepreneurs are responsible for taking the financial risks, and setting up the business.

The entrepreneurs have to put their mind in making various decisions regarding the development, and growth of business.

While making business decisions, the entrepreneurs use elasticity of demand as major factor. The entrepreneur considers the elasticity of demand related to the product he offers in the market. This will help in making the pricing decisions.

If the good offered by the entrepreneur has relatively inelastic demand, then the entrepreneur can set higher price, but if the demand is relatively elastic, then the entrepreneur has to set a lower price in order to compete in the market.

The elasticity of the change in taste and preferences is also taken into consideration by the entrepreneur, because it informs him regarding the need to modify the product, and change it according to the needs of the consumers.

Conclusion:

Hence, while making business decisions, the entrepreneur chooses to use elasticity in various fields, such as demand, supply, preferences, and taste as one of the major factor.

This concept of elasticity helps the entrepreneurs to be prepared for the outcome when they make certain changes in their operations, where elasticity of demand of their good is of utmost importance.