How does elasticity affect the profit maximizing price point?
The profit maximizing price, P depends of elasticity and is given by:
Price Elasticity theory maintains that long-term success and profitability depend upon ideal pricing, or producing a good to the point where the additional revenue of an extra unit of output equals the additional cost of producing that unit, i.e. MR=MC
Now for profit maximizing company
The Above equation shows how the profit maximizing Price, P depends on elasticity.