International Journal of Advances in Management and Economics (IJAME)

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TitleInsurmountable Business Problems and Optimal Managerial Decisions: Significance of Elasticity of Demand
AuthorPurna Chandra Rao
AbstractManagerial economics is the integration of economic tools and techniques with business practice. The concepts of managerial economics provide practical solutions to business problems. The basic aim of any business firm is profit making. The enhancement of sales is the major for making more profits .If the business entrepreneur is capable to predict the cost-output ratio, fixation of price, income of consumer and impact of advertising expenditure, the firm may improve its sales more proportionately. Therefore, to understand the behaviour of sales and to plan their growth, it is necessary to identify the factors that influence the sales and estimate their affect. For this purpose, management should integrate economic concepts with business decision making practice in order to understand and analyse the sales behaviour of the firm. In this process, the concept of elasticity of demand plays the pivotal role, which helps in providing a quantitative value for the responsiveness of the quantity demanded to change in each of the demand determinants. Therefore, this study find that the concepts of elasticity of demand are essential ingredients of optimal managerial decisions in the short run as well as long run plans of the business firm.

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