Consumers in a market economy are inclined by various factors in deciding what to buy. One of these factors is price, and the law of demand that defines the typical relationship between price and quantity demanded. It states that consumers will demand particular product at a lower price, and less at a higher price. However, the price elasticity of demand extends this and observes the extent of such changes in demand in relation to price. It is the sales director’s duty to check the demand increase or decrease in response to a price change in business. So using the methods in elasticity of demand we can analyze the profit of the firm and also revenue.

The making of economic goods is the task and responsibility of entrepreneur. Economic goods produced must be those that will satisfy human needs. The same rule of maximum utility per hour can be applied to many different areas of life, including engaging in charitable activities, improving the environment or losing weight. It is not only a law of economics. It is a law of rational choices. No one can understand the behavior of consumers at all time with exactness. No one could predict exactly the demand would be, when the price of goods changes. The principles of consumer demand suggest that we will make the best use of our money when we equalize the marginal utilities of the last centavo spent on each good with any other good to achieve maximum satisfaction or utility. In analyzing consumers demand the entrepreneur will think in another way that the consumer will still buy the goods when price increases? The demand of consumers will then become elastic. Elasticity refers to the reaction or response of the consumers to change in prices of goods and services.

Elasticity of demand also may depend on the relative change in quantity and price. Buyers may tend to reduce their purchases as price increases, and tend to increase their purchases when price decreases. The change in price is not the only factor that may change the reaction of consumers. The nature of the product (similarity to what he uses) and the particular needs of the consumer (whether important or not) may also affect the change in the reaction or response of consumer. Here I have done the analysis of “Prime” supermarket using the price elasticity of demand to improve the profit and revenue of the supermarket.