A business product with inelastic demand implies that if companies decrease prices it will increase demand by a greater proportion.Therefore, companies facing this situation should decrease prices as the drop-in price will be mitigated by larger percentage increase in demand.

Question

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Inelastic demand means that the demand for the product is not very sensitive to price changes, so decreasing prices will not necessarily result in a greater proportionate increase in demand. In fact, it is possible that decreasing prices could result in only a small increase in demand, and may even lead to a decrease in revenue if the price decrease is significant enough to offset any increase in demand. Therefore, companies facing this situation should be cautious in reducing prices and should conduct thorough analysis before making any price changes.

A Business Product with Inelastic Demand Implies That If Companies