Essay Egt 1 Task 2

Elasticity of demand is measured as the percentage change in quantity demand divided by the percentage change in price .

Elasticity is a measure of the responsiveness of demand to changes in the price of a good or service. In the case of Steam Scot, when the price rises from 4 to 5, demand falls from 60,000 to 40,000 units. The original equilibrium market price of 4 pounds resulted in demand of 60,000 units and this generated revenue of 240,000 pounds. When the prices increased to 5 pounds the resulting demand is 40,000 units, and this generates total revenue of 200,000 pounds. When market price changes from 4 pounds to 5 pounds 40,000 pounds of revenue are lost in this indicates an elastic price elasticity of demand.

When the elasticity of demand is elastic, the change in quantity will be greater that the change in price. Hence, the total revenue will reduce with increasing prices and increase as prices decrease. However, if the business offers goods or services with inelastic price elasticity of demand, then the change in quantity demanded will be smaller than the change in price. Consequently, the total revenue, which is a product of the two will increase when

Inelastic products are products that are mostly classified as a necessity, rare, and addictive products. These products will have a little change in demand quantity when there is a change in price. Additionally, the elastic products are mostly substitutes or complement products, the demand quantity of these products have bigger changes when there is a change in price (Pettinger, 2014).

Under Elasticity of Demand there are two more types that I have not spoken about, one being the Income elasticity of Demand (measures how much the quantity demanded changes as consumer income changes) and the other being Cross Price Elasticity of Demand (measures how the quantity demanded of one good changes as the price of another good changes). I could say that cross price elasticity of demand holds relevance because when consumers are not given a particular good

Cross-Price elasticity- cross price elasticity measures the degree to which two or more goods can serve as substitutes or complements of one another. If the cross-price elasticity, meaning that as the price for good A increases demand for good B rises, is greater than 1 than the two items are substitutes. If on the other hand, as the price for good a increases the demand for good B decreases the two items are complements- meaning that the consumers tend to purchase them together and when A becomes cost prohibitive so does good B (Varian, 2005).

Price elasticity of demand is defined as a measure of “the responsiveness or sensitivity of consumers to changes in the price of a good or service” (Thomas & Maurice, 2012, pp. 199). Mathematically, the price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. Demand is said to be elastic whenever the absolute value of the percentage change in quantity demanded exceeds the percentage change in price, which means the absolute value of the elasticity would be greater than one. If the absolute value of the price elasticity of demand is less than one, the demand is said to be inelastic, or less sensitive to the price change. There are various factors that affect the price elasticity of products, in the following sections these factors will be applied to the demand of desktop computers.

When the price of a good falls, the quantity consumers demand of the good typically rises; if it costs less, consumers buy more. Price elasticity of demand measures the responsiveness of a change in quantity demanded for a good or service to a change in price.

Introduction: The business analysts put forth a great deal of subjective expressions about how consumers as well as producers carry on. The law of demand expresses that the good quantity that is demanded or services for the most part declines, and the law of supply expresses the quantity of the good which is produced has a tendency to increase at the business sector cost of that increase in good. These laws don 't catch everything that financial analysts might want to think about the supply and demand model, so they created quantitative estimations, for example, flexibility to give more insight about business sector conduct.

Elastic demand (elasticity) means that demand for a product is sensitive to price changes. Demand elasticity helps a company to predict changes in demand based on changes in: price, competitive goods (substitutes) and other factors such as is the item a necessity or a luxury.

Elasticity of demand determines whether a company can increase or reduce their price on a product, and is therefore detrimental to a company that is trying to maximize their profits. Cross-price

Price Elasticity of Demand is the quantitative measure of consumer behavior whereby there is indication of response of quantity demanded for a product or service to change in price of the good or service ( Mankiw,2007). The Price Elasticity of Demand is calculated using either the point method or the midpoint method.

Demand elasticity means how perceptive the demand for a good is to fluctuations in other economic variables. Demand elasticity is essential as it supports firms model the possible transformation in demand due to changes in value of the good, the result of changes in prices of further goods and numerous other market factors. A firm grasp of demand elasticity benefits to direct firms regarding more ideal competitive performance. Demand elasticity is a measure of how great the capacity demanded will be different if additional factor changes. An example is the price elasticity of demand; this measures how the quantity demanded fluctuates with price. This is fundamental for setting prices so as to maximizing profit.

Elasticity is an economic concept that measures the change in the total demand for service or good and the price movements of that service or good. The product is considered to be resilient if the quantity demand for the product changes drastically as its price increases or decreases. Conversely, if the quantity demand for a product changes little when its price fluctuates, the product is considered to be inelastic.

Elastic demand means that demand for a product is sensitive to price changes. For example, if the market value of a product increased, there will be fewer units sold. If the market value of a product decreases, there will be an increase in the quantity of units sold. Elastic demand is also referred to as “the price elasticity of demand”.