Pricing decisions can be based on determining whether the demand for a product is price elastic or price inelastic.

Question

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Pricing decisions can be influenced by the elasticity of demand for a product. If demand is price elastic, meaning that consumers are highly responsive to changes in price, then a decrease in price can lead to an increase in total revenue. On the other hand, if demand is price inelastic, meaning that consumers are not very responsive to price changes, then a decrease in price may not result in a significant increase in total revenue. Therefore, determining the elasticity of demand is an important factor in making pricing decisions.

Pricing Decisions Can Be Based on Determining Whether the Demand