Correct Answer: The optimal pricing strategy.

Solution : The correct answer is (a) The optimal pricing strategy.

Elasticity provides crucial information to businesses regarding how responsive consumers are to changes in price. By understanding the price elasticity of demand for their products, businesses can make informed decisions about their pricing strategy. Specifically, they can assess the impact of price changes on the quantity demanded and, consequently, on their total revenue.

If demand is elastic (elasticity greater than 1), a decrease in price may lead to a more than proportionate increase in quantity demanded, resulting in increased total revenue. On the other hand, if demand is inelastic (elasticity less than 1), a price increase may result in a less than proportionate decrease in quantity demanded, potentially increasing total revenue.

Therefore, by considering the concept of elasticity, businesses can make more accurate pricing decisions and determine the optimal pricing strategy that maximizes their revenue and profitability.