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DEMAND ELASTICITY

# DEMAND ELASTICITY - The increase in the demand for a...

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CHAPTER 3: ELASTICITY OF DEMAND The factors affecting demand are (1) the price of the commodity, the income of the consumers and the price of substitute or complementary products. The elasticity of demand is a measure of t response in demand resulting from change in the factors affecting it. For example, if the price of a commodity increases, the demand for that commodity decreases. Th response in the change inq quantity resulting to the change in price is called the price elasticity of Similarly, an in crease in the income of the consumers causes an increase in the demand for a co The increase I n the demand for the commodity resulting from the increase in income is called the income elasticity of demand. For related products,  X and Y, and increase in the price of Y, cause for Y to decrease, a decrease in the demand for Y causes an increase in the demand for the subs

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Unformatted text preview: The increase in the demand for a product resulting from increase in the pricce of a substitute prod cross elasticity of demand. Estimating the Elasticity of Demand Q Y e R= Y*Q 12 #DIV/0! 1 10-5 10 2 8-2 16 3 6-1 18 max revenue where the elasticity is -1 4 4-0.5 16 5 2-0.2 10 6 RELATIONSHIP AMONG ELASTICITY, PRICE, QUANTITY AND REVENUE 1 2 3 4 5 6 7 2 4 6 8 10 12 14 f(x) = -2x + 12 Column C Linear Regres-sion for Column C ELASTICITY PRICE QUANTITY REVENUE E< -1.00 ELASTIC DECREASES INCREASE INCREASES E > -1 INELASTICDECREASES INCREASE DECREASES E = -1.00 UNIT DO NOT DO NOT REVENUE ELASTIC CHANGE CHANGE IS MAX. PRICE QUANTITY the he f demand. ommodity. e es the demand stitute product. duct is called...
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DEMAND ELASTICITY - The increase in the demand for a...

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