Businesses use price elasticity of demand (PED) to make more money by looking at how customers react to changes in prices. Here are some important strategies they use:

1. Figuring Out Elasticity:

   • When PED is greater than 1 (we call this elastic), lowering the price can cause a bigger increase in the number of items sold.
   • When PED is less than 1 (known as inelastic), raising the price can actually help bring in more money.

2. Boosting Revenue:

   • In elastic markets, businesses might lower prices to get more people to buy. For example, if they drop prices by 10%, it could lead to a 15% rise in sales, which helps them earn more money.
   • On the flip side, in inelastic markets, businesses can raise prices. For instance, if they increase prices by 10%, they might only see a 5% drop in sales. This still means they make more money overall.

3. Looking at Other Options:

   • Companies study what similar products are out there to help them decide on the best prices.

By understanding PED, businesses can make smart pricing decisions that help them earn more profits.