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Microeconomics Coursework 1. How is elasticity a useful concept for firms and government? Elasticity, which according to A.Neale and C.Haslam "Economics in a business context" is a term "used in economics to describe the relationship between a proportionate change in one variable and a proportionate change in a related variable". Plain-speaking it is the measure of how one aspect of a products make-up, be it the price, or supply of available substitutes, will affect another. Elasticity demonstrates the relationship one factor such as price has on another such as demand. It is a useful concept for firms because the main goal of any organisation is to maximise profits. A firm will not just increase the price of a product without investigating the possible effects on demand. Elasticity can be used by a firm to clear a surplus. It is a useful concept for Government because it is important that they know what...

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