The creation of economic
goods is the task and responsibility of entrepreneur. Economic goods to be produced must be those that will satisfy human want. The same rule of maximum utility per hour can be applied to many different areas of life, including engaging in charitable activities, improving the environment or losing weight. It is not merely a law of economics. It is a law of rational choices. No one can fathom the behavior of
consumers for all time with accuracy. No one could predict exactly what the
demand would be when the price of commodities changes. The principles of
Consumer demand suggest that we will make the best use of our money when we equalize the marginal utilities of the last centavo spent on each good with any other good to achieve maximum satisfaction or utility.
In analyzing consumers demand questions will arise to the mind of entrepreneur like: will the consumer still buy the goods when price is arise? how much will the consumers is able to pay? The demand of consumers will then become
elastic. Elasticity refers to the
reaction or response of the consumers to
change in prices of goods and services. Elasticity of demand also may depend on the relative change in quantity and price. Buyers may tend to reduce their purchases as price increases, and tend to increase their purchases when price decreases. The change in price is not the only factor that may change the reaction of consumers. The nature of the product (similarity to what he uses) and the particular needs of the consumer (whether important or not) may also affect the change in the reaction or response of consumer. Demand may be elastic or inelastic. Demand is likely to be elastic when: want is not urgent, close substitutes are available, goods is durable or repairable, goods has multiple uses. On the other hand, demand is likely to be inelastic when: want is urgent, good substitutes are unavailable, wanted jointly with some complementary item. ***
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