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Why do suppliers want to create more inelastic demand relationships in the products that they sell?

Why do suppliers want to create more inelastic demand relationships in the products that they sell?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question

. Why do suppliers want to create more inelastic demand relationships in the

products that they sell? 

  1. When the price of cellphone charges rises from $480 to $600 a month, the

quantity demanded decreases from 204 million to 196 million subscribers.

Calculate the price elasticity of demand for cellphone charges. Is the demand

for elastic or inelastic? Would the demand for Flow charges be more elastic or

less elastic than the demand for overall cellphone charges? Why? 

  1. When the price of rice falls from $100 to $80, the quantity demanded of rice

increases from 10 to 25, the quantity demanded of potatoes decreases from 20

to 15, and the quantity demanded of chicken increases from 18 to 35.

  1. Calculate the cross elasticity of demand for potatoes with respect to rice.

 

  1. Calculate the cross elasticity of demand for chicken with respect to rice.

 

iii. Of what use are these two cross elasticities of demand to the owner of a

business that sells potatoes and chicken? 

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