Concept of Elasticity

There are 3 concept of price of elasticity that a firm can use to decide whether to change the price in the goods and services. Price elasticity of demand measure the responsiveness to price changes. The concept is elastic demand, inelastic demand and unit elastic demand. Elastic demand is the percentage change in quantity demanded more than percentage change in price. Based on the diagram 1, we can see that quantity has decrease when the prices increase. The company may decrease the prices to increase the quantity base on the diagram 1. When the quantity of the product has increases, the company will buy more goods and services from the suppliers so that both sides will get profits.

Diagram 1.

For Example, Digi. Digi provide us an plan that will make both side to earn profit and to increase the quantity of product. Digi give us many type of plan to allow us to postpaid each money to loan the phone that we purchases with internet usage. For example, Current Iphone 5 price would be $2199 and Digi give us low price and unlimited internet usage base on the plan that we purchases. Digi latest plan is to set the Iphone 5 price $80 with 3gb of internet use.

By= Herman Chan