Why do managers need to know about elasticity of demand?

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Price elasticity of demand refers to the relationship between the price of a product and the quantity of the product that is demanded by consumers.

A product's demand is said to be elastic if, when the price goes up, revenues go down.  If the price goes up and revenues go up, then demand is inelastic.

For a manager, this is very important information.  If a manager knows the elasticity of the demand for his firm's product, he will be able to know whether to raise or lower prices.  This is surely a very important decision for any manager to make.

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