Explanation, Analysis and Understanding of the Sub-topics, such as, Demand, Supply, Price Elasticity and Income Affects over Customers

1476 WordsJun 21, 20186 Pages
Explanation, analysis and understanding of the sub-topics, such as, demand, supply, price elasticity and income affects over customers. Demand is the willingness of a product which a person is able to buy at the given price. Demand is an important tool in the market. The law of demand states that, as the price of a product increases, demand for that particular product will decrease. Price and quantity demanded have an inverse relationship between them. Price elasticity of demand is another concept showing a change in the responsiveness of a good or service due to a change in its price. Price elasticity of demand can be calculated by this formula:- %change in quantity demanded %change in price Supply is another tool used in…show more content…
According to income elasticity, as mentioned above, people earning more will buy more, this shows a positive income elasticity of demand associated with normal goods. As the income rises, it will lead to a rise in demand. If the income elasticity of demand is more than 1, it shows that a particular commodity is considered to be a luxury or superior good, whereas, if income elasticity of demand is less than 1, then it shows that it is a necessity good. Prices of related goods can also influence the demand of customers of these markets. For instance, in Giant Supermarket, if a person buys five bottles of Coca-Cola, he will get 1 can of Coca-Cola free. This will attract customers especially youth. They might consider buying the products from Giant Supermarket rather than going to Cyberia Market as they do not offer such promotions. At this situation, the quantity demanded of Pepsi might even falls, as they both are substitute goods. If there is a decreases in the price of one good, then the quantity demanded for another good will fall. The demand curve will shift towards right for Giant Supermarket but for Cyberia Market it might shifts to the left, as people are attracted more towards Giant Supermarket. Another perspective is of cross elasticity of demand in this case. As cross elasticity of demand measures the responsiveness of the demand for a good according to a change in the price of another good. For

More about Explanation, Analysis and Understanding of the Sub-topics, such as, Demand, Supply, Price Elasticity and Income Affects over Customers

Open Document