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31 October, 17:28

Discount stores sell relatively elastic goods. Certeris paribus, explain why selling at a relatively low price is profitable for them

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  1. 31 October, 21:22
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    A slight increase in price will result in more than proportionate decrease in revenue

    Explanation:

    All other things being equal, if demand for a product is relatively elastic, then the proportionate change produced in demand is greater than the proportionate change in price of a product.

    Since Discount stores sell relatively elastic goods, it is profitable to sell at a relatively low price.

    The reason is that, a slight increase in price will lead to more than proportionate reduction in quantity demanded thereby leading to a drastic drop in revenue for Discount Stores
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