Showing posts with label Elasticity. Show all posts
Showing posts with label Elasticity. Show all posts

Broadly discuss the measurements of price elasticity of demand.

Measurement of Price Elasticity of Demand: 

There are 5 different measurements of Price Elasticity of Demand. They are as follows:
  1. Perfectly Inelastic Demand (Elasticity = 0)
  2. Perfectly Elastic Demand (Elasticity = Infinity)
  3. Unit Elasticity of Demand (Elasticity = 1)
  4. Relatively Inelastic Demand (Elasticity < 1)
  5. Relatively Elastic Demand (Elasticity > 1)

These measurements has been discussed here. In the following discussion 5 symbols has been used which are

Explain Cross Elasticity of Demand.


Cross Elasticity of Demand : Cross elasticity of demand occurs when a change in price of a commodity brings the change in demand of another commodity. The cross elasticity of demand for two goods X and Y, is the ratio of the percentage change of quantity purchased of X to the percentage change in price of Y.

            Cross elasticity of demand occurs for two goods which are interrelated, such as complementary goods, substitutable goods, etc. ... 

Explain Income elasticity of demand.

Income elasticity of demand : A persons demand for a good may change with his\her change in income. The income elasticity of demand is the ratio of percentage change quantity purchased per time to the percentage change in income. Thus,

Explain Price elasticity of demand

Price Elasticity of Demand : Price elasticity of demand measures the quantitative response of demand to a change in price. This is the ratio of percentage change in demand to the percentage change in price. So the price elasticity of demand is,

What is elasticity, elasticity of demand, elastic demand, and inelastic demand?

         Elasticity : In economics, elasticity is the ratio of the percentage change in one variable to the percentage change in another variable. Elasticity is a popular tool among empiricists because it is independent of units and thus simplifies the analysis. ...