Elasticity demand is an effective tool in the hands of a producer in that it enables him?

Elasticity of demand is an effective tool in the hands of a producer as it helps him to set the price that maximizes his profit. Elasticity of demand refers to the responsiveness of quantity demanded to a change in price. When the demand for a product is elastic, a small change in price results in a significant change in the quantity demanded. In contrast, when the demand for a product is inelastic, a change in price has a relatively small effect on the quantity demanded. A producer can use elasticity of demand to set the price that maximizes his profit. If the demand for his product is elastic, then he will want to set a lower price to increase the quantity demanded and maximize his revenue. Conversely, if the demand for his product is inelastic, he can set a higher price to maximize his revenue and profit. In this way, a producer can use elasticity of demand to find the optimal price point that maximizes his profit. This helps him to stay competitive in the market and also to determine what he should produce based on the demand for his product. Therefore, the correct answer is option (D) set his price to maximize his profit.