This is the basic principle in western economics. If the demand is flexible, that is to say, the demand of consumers changes greatly because of the price changes of consumer goods, such as gold and silver jewelry. If the price goes up, consumers will reduce their demand for him, because these things are not necessities because of limited economic strength.

For inelastic commodities, the price should be raised, because the demand cannot reflect the rise and fall of commodities, such as rice and other necessities. When the price of rice increases, consumers will not buy it, and the profit will be the biggest.

Of course, this is purely theoretical. In the real market, there is also the influence of behavioral psychology. For example, although the price of elastic gold has skyrocketed, the demand is still rising, because people have the mentality of chasing investment and are afraid of stepping on the air.

First, the difference between elastic goods and inelastic goods.

1. price: elastic goods usually have higher prices, while inelastic goods usually have lower prices.

2. Category: Most flexible goods are luxuries in life, not necessities in daily life; Inelastic goods are mostly necessities of life, such as salt and oil.

3. The relationship between commodity demand and price: the demand for elastic commodities is greatly affected by price, while the demand for inelastic commodities is less affected by price.

Second, the demand for goods.

1, number and similarity of substitutes; If a commodity has many similar substitutes (such as cola), then the demand price elasticity of this commodity is great. Because once the price of this commodity rises, even slightly, consumers will often abandon this commodity and buy its substitutes instead, thus causing changes in demand.

2. The importance of commodities; If a commodity is the basic necessity of people's life, even if the price rises, people still want to buy (such as salt), and its demand elasticity is very small or inelastic; Some unnecessary high-end goods, such as expensive jewelry and high-end clothing, can only be purchased when consumers' purchasing power is enhanced, and their demand elasticity is great.

3. What is the purpose of the goods? Generally speaking, the more uses a commodity has, the greater its demand elasticity, and vice versa. The different uses of any commodity have a certain order. If the price of a commodity rises, consumers will reduce their demand and use their purchasing power for important purposes, so the number of purchases will decrease, and as the price decreases, the number of purchases will increase.

4. Time and price elasticity of demand are very important. The shorter the time, the smaller the elasticity of commodity demand; The longer the time, the greater the elasticity of demand for goods. This is because for a long time, consumers are more likely to find substitutes, and the more substitutes, the greater the elasticity of demand.

5. The relationship between demand price elasticity and total sales revenue. The demand price elasticity coefficient is closely related to the seller's income, which makes the demand price elasticity theory more practical.