Economics Tuition: Discuss how Price Elasticity of Demand (PED) and Price Elasticity of Supply (PES) can be used by the Sakae Sushi manager to maximise profit

Introduction

Definition of PED and PED and state the market information of the PED and PES will help producers in deriving the effective price and production strategy to raise and minimise cost of production so as to raise the profit.

Main Body

  • Explain how the concept of PED determines the value of PED for Sakae Sushi.
  • Explain how the concept of PES determines the value of PES for Sakae Sushi.
  • Explain how the PED is used to increase revenue by decreasing the price level during weekdays and maintain high price in weekend to raise total revenue as the demand is price-inelastic
  • Explain how the producer will conduct their stock management or food production – given that Sakae Sushi has price-inelastic supply – as product is perishable and cannot be stocked and the cost of resource is high
  • Discuss the limitations of the concepts (refer to other essays – 3 points)

Conclusion

In sum, the concepts of PES and PED are useful to help producers understand how to increase revenue and lower cost of production to maximize total revenue. However, these concepts must be applied with the understanding of the nature of the good and the limitations of the elasticity of demand and supply concepts.