The purpose of this assignment is to develop learners’ ability to apply the concepts of demand, supply, and elasticity for a product in the market.
Learners are required to choose ONE product that is available in Malaysia. Discuss the factors that determine the demand and supply of the chosen product. Determine the type the elasticity for the product and why is it so.
The price elasticity refers to the degree of responsiveness of demand as a result of a change in price.
The price elasticity of demand is important to firms because it helps them in pricing their products. The firm needs to know whether their product has an elastic or inelastic demand.
A product with elastic demand is more responsive to a change in price. Such goods have numerous substitutes; therefore, the consumer can go for another brand if their favorite company is charging more for the product. If the firm finds out that their good has elastic demand, they might try to differentiate the product from others. Differentiation can help them charge a higher price for a while, but in the long-run consumers will still go for the most affordable item. As a result, most firms tend to focus on producing more elastic goods. Since they can’t increase the price as much as they’d like to, they have to produce more in the hopes that they will sell more and increase revenues.