What do you understand by the own-price elasticity of demand for a good?

demand for a good is high and the supply is low, the price increases. At some point people’s

The elasticity of demand measures the buyer’s reaction to price as its changing. “Economists measure the degree to which demand is price elastic or inelastic with the coefficient E d, defined as E d = percentage change in quantity demanded of product X/ percentage change in price of product X” (McConnell, C. 2011). Therefore, Ed=∆Qd/∆Pd. When elasticity of demand is measured less than one, demand is considered to be inelastic. The coefficient in an inelastic range is less than one. When this takes place the percentage change in price is more than the percentage change in quantity. It can be said that when inelastic demand is present that quantity becomes less effected by price changing.

According to the elasticity of demand law, a change in the quantity demanded leads to a change in price of the product. As such, if there were an increase in demand for pharmaceutical products, there would be an increase in the prices, while a decrease in these prices leads to a decrease in prices of pharmaceutical products. However, goods such as Geffen and Veblen do not obey the law of supply and demand, as

Demand is elastic where there is a large availability of substitutes. The reason for this as the price of a good increases, if there is a large amount of substitutes for this particular good, the consumer will choose the substitute. As discussed earlier, soda is an excellent example of this elasticity. Airline tickets are another example. As one airline raises its cost of a ticket or to even pay for a bag to be checked, a consumer will more likely choose a cheaper ticket or an airline that doesn’t charge for baggage over the original. If there is no (or a very limited) amount of substitutes for a good, elasticity is said to be negative. A price change in medication will not likely change the behavior of a consumer relative to demand since there isn’t a substitute to taking the medication. Household utilities are another example of a limited amount of substitutes.

Discussion 1: Elasticity. Analyze the determinants of the price elasticity of demand and determine if each of the

Elasticity of demand is a variation in price depending on the demand of a good or service. Items like vehicles, appliances, jewelry, and electronics will sell less at full price than they do when there is a drop in price. When producers and retailers drop the price enough for the market to take notice, people react in deciding to purchase the good or service. This reaction and sensitivity to the market is known as Elastic demand.

Economists have created a theory of demand which states the following. Demand curve has a downward slopping which shows the relation between price and quantity while all other factors are equal. At higher prices the demand will decrease, while at lower prices demand will increase.

Student Answer: A. : (Q1 – Q0)/((Q1 + Q0)/2)÷ (P1 – P0)/((P1 + P0)/2) = (500-300)/((500+300)/2/(10-20)/((10+20)/2 = )200/400)/(10/15) = .5/.67 = .746. This demand is inelastic because the demand elasticity is less than 1. B. When price elasticity changes by 9% you will have a decline in price by 11.7 %. Take change in price (9%)*demand elasticity (1.3) = .117 = 11.7%. c. 35*180 = $6300.00 TR 20*300 = $6000.00 TR = $300.00 decline in TR if you drop the price from $35 to $20.

To summarize the concept, when the price of a product falls, the quantity demanded of the product will increase, and conversely, when the price of a product increases, the quantity demanded of the product will decrease, where all other relevant factors are constant. (Glen, 2012).

Changes in demand factors other than price of the good will result in a change in demand. An increase in demand is depicted as a rightward shift of the demand curve. An increase in demand means that consumers plan to purchase more of the good at each possible price. A decrease in demand is depicted as a leftward shift of the demand curve. Income is another factor that can affect demand. If a good is a normal good, increases in income will result in an increase in demand while decreases in income will decrease demand. If a good is an inferior good, increases in income will result in a decrease in demand while decreases in income will increase demand. Other factors affecting supply include technology, the prices of inputs, and the prices of alternative goods that could be produced. An advance in technology, a decrease in the prices of inputs, or a decrease in the prices of alternative goods that could be produced will result in an increase in supply. A deterioration of technology, an increase in the prices of inputs, or an increase in the prices of alternative goods that could be produced will result in a decrease in

Abstract—Recent works have indicated that the price of computers is a key factor in explaining the growth of computer spending. However, it remains unclear whether the price elasticity of the demand for computers is constant over time. Findings on the pattern of price elasticity will have important implications in the study of information technology (IT) innovation diffusion. To test the hypothesis of dynamic price elasticity, we extend existing growth models to include a price factor with different elasticity specifications. Nested specifications of three growth models were

Price elasticity of demand enables business organizations to predict how their total revenue will be effected in the event they change the prices of their products. When a given good has inelastic price elasticity of demand i.e. Ed 1, then the percentage change in the quantity demanded is greater that the change in price. Thus, raising the prices of such commodities results to decline in the total revenue because the business may loss customers to their competitors. Nonetheless, reducing the prices of goods with elastic elasticity of demand increases the total

Often a market may be affected by a demand-side “shock” which takes away the pricing power of

When the price of a good rises the quality demanded falls, if we think about how much does it falls. To figure out by how much it falls we must calculate the price elasticity of demand which is calculate by how responsive demand is to rise in price. Also, the price elasticity of supply measures the responsiveness of quantity supplied to a change in price.

India is going through a telecom revolution, especially in the wireless telephony segment. The adoption of mobile telephony remains unparalled in scope, as users from diverse segments increasingly choose to exercise the option of personal mobility. On an average the user base has been adding 4-5 million subscribers per month.