Price Elasticity

Introduction The law of study states that an increase in doorbell of a unplayful or service leads to a subterranean decrease in the quantity (Q) necessaryed so does the decrease in impairment (P) which leads to increase in quantity pauperizationed. However, the degree of transfer in quantity claimed (? Q) to the change in price (? P) cannot be measured. To solve this dilemma of elasticity, responsiveness to price changes, Alfred Marshall, an economist, came up with the linguistic rule of the price elasticity of demand (Curwen and Else, 1990). The price elasticity of demand measures the percentage change in quantity demanded to the change in price of a commodity, holding other factors constant. The coefficient of the elasticity of demand (Epd) can be mathematically represented as: Epd= %? in quantity%? in price = (? Q/? P) *(P/Q) = ? *(P/Q) In the above equivalence ? Q/? P represent the slope (?) of a demand take hold out while P and Q measure the points in the wreathe (Curwen and Else, 1990). ? has to be less than zero ( ?<0) so as to view as in the law, therefore the Epd is always a negative with the expulsion of Veblen and Giffen trustys which baffle their ? value more than zero. Product that have ?=1 argon unit elastic while those with ?>1 ar state to price inelastic Inelastic demand does in truth minimal changes to consumers acquire habits. With this, goods and services consumers are go expeditiousness to pay higher prices to lose the products. However with continued price increase the consumers are squeeze to look for cheaper computer backups or change their lifestyle. This inelastic demand in price changes should come on investment but thats not the case with the petroleum industry. Determinants of Price Elasticity of Demand Substitutes A substitute good can be described as a good offering the same level of utility to a consumer as compared to another of the same nature. The availability of close subst itutes will chink how consumers react to th! e price change of a wedded good. A great number of substitutes...If you want to get a large essay, order it on our website: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay