As a business owner, you are always concerned about how much of your good or service is demanded. if there is an increase in your pro - duction costs, what options do you have to keep your product in demand?

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Business

Luca

22 June, 13:58

As a business owner, you are always concerned about how much of your good or service is demanded. if there is an increase in your pro - duction costs, what options do you have to keep your product in demand?

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Brenden Whitehead · Answer 1

Depending on whether the good is elastic or inelastic, there is one choice for each situation. If the good is elastic, the producer can raise the price of the good to compensate for the rise in production costs, but this will lower the overall revenue received because demand will likely fall to make up for this increase. If the good is inelastic, the price can be raised again, but this time it will increase the overall revenue because demand will stay the same (due to the good being inelastic and more of a necessity than a luxury).