Page 358 - Introduction to Business

332 PART 3 Marketing

Wal-Mart price signs indicate the
company’s emphasis on low prices
and its assumption that the demand
for its products is elastic.

inelastic demand A combination of The concepts are reversed if the curve for a product represents inelastic
prices and quantities for a product that demand, that is, the situation where the market is not very responsive to a product’s
indicates that the market is not very
responsive to a product’s prices prices. Exhibit 9.9b shows an inelastic demand curve that tends toward the vertical.
With an inelastic demand curve for a product, price increases are desirable, but not
price decreases. At a price of $5 and a demand of five units, total revenue is $25.
When the price is increased to $10, total revenue increases to $40 ($10 4 $40).
However, a price decrease would result in lower total revenue, $40 at a price of $10
versus $25 at a price of $5.

reality Visit a local supermarket and list those products for which you believe
CH ECK the demand is inelastic or elastic.

EXHIBIT 9.9 (a) (b)
Elastic Demand Curve Inelastic Demand Curve
Elastic and Inelastic
Demand Curves 12 12

10 10
9
8 8
Price ($) 6 Price ($) 6

5
4 4

2 2

2 4 6 8 10 12 2 4 5 6 8 10 12
Quantity Quantity

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