Applying a uniform markup to each of a firm's products is less profitable than varying the markup based on the elasticity of demand because the latter is able to exploit the sensitivity of quantity demanded to a change price.

Question

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Varying the markup based on the elasticity of demand means that products with more elastic demand will have a lower markup, while products with inelastic demand can have a higher markup. This allows the firm to maximize profits by pricing products at the optimal level where quantity demanded is still high enough to generate revenue. Applying a uniform markup to all products may result in pricing some products too high, leading to lower sales and profits.

Applying a Uniform Markup to Each of a Firm's Products