Price Elasticity Of Demand And Demand

2141 Words Mar 8th, 2015 9 Pages
Price elasticity of demand is the relation of the virtual change in quantity demanded to the virtual difference in price. Mathematically, price elasticity of demand is only the percent change in capacity divided by the percent change in cost. In this essay the following issues will be discussed and examples will be given. To begin with Price Elasticity of Demand will be explained provided with illustrations. Furthermore the measurements of PED, the determinants, the five ranges, which will be, mentioned later at last the relationship between price elasticity of demand with consumer expenditure.

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.

The price elasticity of demand is found by dividing a specific change in capacity by the change in price, which produced it. The changes are constantly balanced, or…

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