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Factors determining the Price elasticity of Demand (Eng Rec.)
Abstract
The elasticity of demand indicates how much quantity demanded of a good will change with the change in its own price or income of the consumer or price of related goods. Factors such as Nature of the Commodity, Availability of Substitutes, Goods with Different Uses, Postponement of the Use, Income of the Consumer, Habit of the Consumer, Proportion of Income Spent on a Commodity, Price Level, Time, Joint Demand affect the price elasticity of demand.
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Introduction
The Law of demand tells us about the direction of change of demand for goods as a result of the change in own price. It simply states that when the own price of the commodity falls demand extends and when its own price rises, demand contracts. But it doesn’t explain how much demand will change. The concept that explains the proportional change in the quantity demanded of a good as a result of the change in its own price is called the Concept of Price Elasticity of demand.
Supposing, the price of apples rises by 20%, as a result of which, Rahul’s demand for apple contracts by 50% and Rohan’s contracts by 10%. Then it will be said that Rahul’s demand for apple is more elastic and Rohan’s demand is less elastic.
Meaning
This concept was developed by Dr. Marshal in his famous book “Principles of Economics of Elasticity of Demand”, is a technical concept. Elasticity is the measure of the responsiveness of one variable to change in order.
The elasticity of demand indicates how much quantity demanded of a good will change with the change in its own price or income of the consumer or price of related goods.
Accordingly, Elasticity of Demand measures are of three types:
i. Price Elasticity of Demand
ii. Income Elasticity of Demand
iii. Cross Elasticity of Demand
Price Elasticity of Demand
Price Elasticity of Demand is the ratio of the percentage change in the quantity demanded of a commodity to a percentage change in its price. It denotes the ratio at which the demand contracts with a rise in the own price of the commodity and extends with...
Read More...
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By Sivananda PandaAbstract
The elasticity of demand indicates how much quantity demanded of a good will change with the change in its own price or income of the consumer or price of related goods. Factors such as Nature of the Commodity, Availability of Substitutes, Goods with Different Uses, Postponement of the Use, Income of the Consumer, Habit of the Consumer, Proportion of Income Spent on a Commodity, Price Level, Time, Joint Demand affect the price elasticity of demand.
Visit Website: Commerceya
Subscribe on Youtube: Commerceya
Introduction
The Law of demand tells us about the direction of change of demand for goods as a result of the change in own price. It simply states that when the own price of the commodity falls demand extends and when its own price rises, demand contracts. But it doesn’t explain how much demand will change. The concept that explains the proportional change in the quantity demanded of a good as a result of the change in its own price is called the Concept of Price Elasticity of demand.
Supposing, the price of apples rises by 20%, as a result of which, Rahul’s demand for apple contracts by 50% and Rohan’s contracts by 10%. Then it will be said that Rahul’s demand for apple is more elastic and Rohan’s demand is less elastic.
Meaning
This concept was developed by Dr. Marshal in his famous book “Principles of Economics of Elasticity of Demand”, is a technical concept. Elasticity is the measure of the responsiveness of one variable to change in order.
The elasticity of demand indicates how much quantity demanded of a good will change with the change in its own price or income of the consumer or price of related goods.
Accordingly, Elasticity of Demand measures are of three types:
i. Price Elasticity of Demand
ii. Income Elasticity of Demand
iii. Cross Elasticity of Demand
Price Elasticity of Demand
Price Elasticity of Demand is the ratio of the percentage change in the quantity demanded of a commodity to a percentage change in its price. It denotes the ratio at which the demand contracts with a rise in the own price of the commodity and extends with...
Read More...