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Business That Sells Price Elastic

Producing inexpensive restaurant meals for McDonalds has been highly profitable, given its ability to sell many burgers quickly and to create standardized franchises all over the world. Having the ability to produce in large volume also buffers a firm against the danger of a price-elastic good getting into a price war with other firms. In the case of Mattel and McDonalds, both firms are so large and have such brand recognition, they are protected to some extent of being forced to sell at such a low price they cannot cover their overhead. Occasionally, pricing low does not achieve the desired objective: during boom times in some instances, the cheapest goods and services will sometimes experience a drop in demand, while higher-end purveyors will see the goods and services they sell become more in-demand.

But selling price-elastic goods always requires clever and deliberate strategizing upon the part of the producer, unlike sellers of price-inelastic goods like gas and basic foodstuffs, who can always count upon a core base of demand.

Reference

Price-elastic goods. (2009). Investopedia. Retrieved November 3, 2009 at http://www.investopedia.com/university/economics/economics4.asp.

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