...Explain the concept of Price Elasticity of Demand and discuss its relevance for Business and Government Price elasticity of demand According to the law of demand: the lower the price the more product is bought. But consumer response to changes in price can vary significantly from product to product. Economists measure the response (sensitivity) of consumers to changes in product prices, using the concept of price elasticity.The gist of the concept of price elasticity is:• if small changes in price leading to significant changes in the quantity bought products, demand for such products are commonly called elastic;• if a substantial change in price leads to only a small change in the amount of purchases, In these cases the demand is inelastic.The extent price elasticity or inelasticity of demand is measured by economists with Ed coefficient calculated by the following formula: The same formula can be written as: Proceeding from the formula, the demand is elastic, if the percentage change in price leads to a greater percentage change in the amount of products that is asked. For example, if a price reduction of 2% causes an increase in demand of 4%, demand is elastic. When demand is elastic, the elasticity is greater than unity. If the percentage change in price is accompanied by a relatively smaller change in the number of products that is asked, then demand is inelastic. If the price reduction of 3% resulting in a growing number of products Asked by just 1%, demand is...
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...To What Extent did Henry VII Fulfill his Aims It is fair to say that at the end of his reign in 1509, Henry VII was successful in all of his aims. His aims included dynastic security for his crown and economic stability for England. However the main aim upon his usurpation to the English throne, was to secure international recognition of being King of England. Due to his usurpation, Henry held an extremely fragile position on the throne of England. This was as a result of Henry killing Richard III at the Battle of Bosworth Field in 1485. Also, the War of the Roses meant that England was crippled economically and also in political stability. There was opposition to Henry domestically and internationally, especially from Margaret of Burgundy (cousin of Richard III). Margaret had infleunce within France, and infleunced Charles VIII of France's support for the Pretender Perkin Warbeck. Due England being economically and politically crippled; as well as the threat from abroad meant that Henry had to pursue an active foreign policy in order to gain international recognition. There is no doubt that Henry's active foreign policy also helped Henry to pursue his aims of economic stability and dynastic security. However, the main aim of Henry VII's foreign policy was to gain international recognition of his right to be King of England. The Medina del Campo alliance of 1489 is major evidence of Henry VII's active foreign policy right at the start of his usurpation. The alliance established...
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...HEFP Economics CW3 Sean Philip Lim, Group I As youth unemployment increases back towards the psychological one million mark as of March 2013 (Evans, 2013), there has been considerable debate among the public and the government on the reasons behind increasing youth unemployment. This essay will aim to decipher the reasons behind high youth unemployment figures and its repercussions on the state. It will accomplish this by first defining and explaining the types of unemployment and the ways in which it is measured. It will then discuss the plausible reasons followed by evaluating the effectiveness of solutions that are currently being implemented or proposed. Lastly, it will provide a value judgement on the consequences that might occur should high youth unemployment remain. Unemployment is defined as the ‘number of jobless people who want to work, are available to work, and are actively seeking employment’ (Gillespie, 2007, p.347). As of January 2013, unemployment stood at 7.8% (BBC, 2013) marking a downward trend since October 2011. Within unemployment, there is youth unemployment, defined as the ‘percentage of unemployed young people (16-24) in relation to every young person who is active in the labour market’ (ONS, 2013). As of March 2013, youth unemployment stood at 21.2%, a rising trend since August 2004 as depicted in figure 1 (Evans, 2013). Source: The Guardian, 2013 Figure 1 There are two methods of measuring unemployment...
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...Determinants of Price Elasticity of Demand Register for FREE to remove ads and unlock more features! Learn more A good's price elasticity of demand is largely determined by the availability of substitute goods. Learning Objectives • Explain how a good's price elasticity of demand may be different in the short term than in the long term. • Relate the existence of close substitutes to a good's price elasticity of demand. ________________________________________ Key Points o A good with more close substitutes will likely have a higher elasticity. o The higher the percentage of a consumer's income used to pay for the product, the higher the elasticity tends to be. o For non-durable goods, the longer a price change holds, the higher the elasticity is likely to be. o The more necessary a good is, the lower the price elasticity of demand. ________________________________________ Term • Substitute Good A good that fulfills a consumer need in a way that is similar to another good. Register for FREE to remove ads and unlock more features! Learn more Full Text The price elasticity of demand (PED) is a measure of how much the quantity demanded changes with a change in price. The PED for a given good is determined by one or a combination of the following factors: • Availability of substitute goods: The more possible substitutes there are for a given good or service, the greater the elasticity. When several close substitutes are available, consumers can easily switch from...
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...Personalized Study Guide Results: Score: 12 / 12 Concepts Mastery Questions Pricing Decisions 100% Market Systems 100% Market Equilibrium 100% Concept: Pricing Decisions Mastery 100% Questions 1 . Revenue increases when • A. producer surplus increases Correct : Producer surplus is the difference between the minimum price the producer is willing to receive and what they actually receive. The surplus is their profit, and the larger the surplus, the greater their profit on the good. When it decreases, the producer receives a price closer to the minimum acceptable. The consumer surplus measures what the consumer is willing to pay and that price’s difference from the market price. The closer to the market price, the higher the consumer surplus, as consumers are spending less than they are willing to, and the less spent, the lower the revenue will be for the good. Materials • Producer Surplus 2 . An increase in the price of an inelastic goods • C. increases revenues Correct : Inelastic goods are necessities that consumers continue to purchase even when the price increases. This increases the revenue, as more is paid for each good. The percentage change in price increases faster than the change in quantity, which may remain constant. When more is paid for a good or a service, revenue increases. Materials • Price Elasticity and the Total-Revenue Curve • Inelastic Demand 3 . Price elasticity of Demand increases whe • C. people become more price...
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...4/14/2016 [Type the document subtitle] | Elodie Henry | Elasticity of demand | a) Explain the concepts of price elasticity of demand, income elasticity of demand, and cross elasticity of demand. In economics, demand elasticity refers to the responsiveness of demand due to changes in other economic variables. It is an important concept introduced by the economist A. Marshall, which helps firms to anticipate effects of changes in economic variables so as to adopt an optimal competitive behavior. To better understand the concept of elasticity of demand we will first concentrate on the economic factors affecting demand. Demand is referred to as being the amount of goods and services that consumers want and have the capacity to buy at a specific price and location for a particular period in time. It is very important for demand to be effective that the consumers have the purchasing capacity and willingness to buy the goods or services. There are five main factors that determine the demand for a good; the price of the product, the prices of other products, the consumer’s income and wealth, the consumer’s tastes and the various individual- specific or environmental factors. For the concern of this essay we are going to concentrate on the 3 first determinants of demand mentioned above and how they are measured. The first factor influencing demand is the price of the good itself. Consumers react according to the price set by the producer. The lower the price the greater...
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...Analysis Overview . The Elasticity Concept Own Price Elasticity Elasticity and Total Revenue Cross-Price Elasticity Income Elasticity II. Demand Functions Linear Log-Linear III. Regression Analysis The Elasticity Concept How responsive is variable “G” to a change in variable “S” If EG,S > 0, then S and G are directly related. If EG,S < 0, then S and G are inversely related If EG,S = 0, then S and G are unrelated The Elasticity Concept Using Calculus An alternative way to measure the elasticity of a function G = f(S) is If EG,S > 0, then S and G are directly related If EG,S < 0, then S and G are inversely related If EG,S = 0, then S and G are unrelated Own Price Elasticity of Demand Perfectly Elastic & Inelastic Demand Own-Price Elasticity and Total Revenue Elastic Increase (a decrease) in price leads to a decrease (an increase) in total revenue. Inelastic Increase (a decrease) in price leads to an increase (a decrease) in total revenue. Unitary Total revenue is maximized at the point where demand is unitary elastic Elasticity, Total Revenue and Linear Demand show graph Elasticity, Total Revenue and Linear Demand show graph Elasticity, Total Revenue and Linear Demand show graph Elasticity, Total Revenue and Linear Demand show graph Elasticity, Total Revenue and Linear Demand show graph Elasticity, Total Revenue and Linear Demand show graph Elasticity, Total Revenue and Linear...
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...Explain the Concept of Price Elasticity of Demand and Discuss Its Relevance for Business and Government Explain the concept of Price Elasticity of Demand and discuss its relevance for Business and Government Price elasticity of demand According to the law of demand: the lower the price the more product is bought. But consumer response to changes in price can vary significantly from product to product. Economists measure the response (sensitivity) of consumers to changes in product prices, using the concept of price elasticity.The gist of the concept of price elasticity is:• if small changes in price leading to significant changes in the quantity bought products, demand for such products are commonly called elastic;• if a substantial change in price leads to only a small change in the amount of purchases, In these cases the demand is inelastic.The extent price elasticity or inelasticity of demand is measured by economists with Ed coefficient calculated by the following formula: The same formula can be written as: Proceeding from the formula, the demand is elastic, if the percentage change in price leads to a greater percentage change in the amount of products that is asked. For example, if a price reduction of 2% causes an increase in demand of 4%, demand is elastic. When demand is elastic, the elasticity is greater than unity. If the percentage change in price is accompanied by a relatively smaller change in the number of products that is asked, then demand is inelastic...
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...|A Report on | |Elasticity and Related Problems | |A Report on | |Elasticity and Related Problems | Course Title: Microeconomics Course Code: F – 106 Submitted To: Lubna Rahman Lecturer Department of Finance University of Dhaka Submitted By: |Serial No. | | | |Name | | | |ID No. | | | | | | | |01. | | | |Md. Tanvir Ahmed Chy ...
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...TERM PAPER FIRST SEM MBA MANAGERIAL ECONOMICS “Kinds Of Elasticity Of Demand” “Factors Influencing Elasticity Of Demand” GROUP 2 ROLL NO | NAME | 7 | PRAVEEN KUMAR K L | 8 | PRAVEEN R | 9 | PRITHVI LINGH HONNESH | 10 | PRITHVI P M | 11 | PRIYA DARSHINI B A | 12 | PRIYANKA JAHAGIRDAR | ------------------------------------------------- ABSTRACT From the managerial point of view, the knowledge of nature of relationship between demand and its determinants alone is not sufficient. What is more important is the extent of relationship or the degree of responsiveness of demand to the changes in its determinants. The degree of responsiveness of demand to the change in its determinants is called elasticity of demand. The concept of elasticity of demand plays a crucial role in business-decisions regarding maneuvering of prices with a view to making larger profits. Almost most businessmen are intuitively aware of the elasticity of demand of the goods they make, however, the use of precise estimates of elasticity of demand will add precision to their business decisions. In this paper we will discuss * The various kinds of elasticity of demand * The nature of change and how it affects the decision taking. * How demand decisions in response to price changes vary for different types of goods? * Factors influencing the elasticity of demand INTRODUCTION Governments, business firms, supermarkets,...
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...focused primarily on opportunity cost, supply and demand, and elasticity. Before class we had concerns as we either had not discussed the concepts since high school or college or either had no clue of what these things were or what they meant. Some of us were also unfamiliar with the graphs being used and cringe at the sight of calculating formulas into a graph. At this point there are varying degrees of comfort with the material, but we are optimistic with more study time and practice we will all be successful. Opportunity Cost As the class began the concept of opportunity cost became clear to us all and we now understand that it is something that must be forgone in order to pursue a certain action. Or more simply put the value of the next best choice given up when making a decision. One of our group members was actually experiencing the concept of opportunity cost while we were in class as they had an exam scheduled for the next day that they needed to pass in order to start a new job. The decision of whether to attend class or use that time to study had come in to question and it was determined the value of attending class would be more beneficial than staying home and attempting to catch up on what was missed in class. Because of this situation and the others discussed in class we are comfortable with the concept of opportunity cost. Supply and Demand As our discussion went on into supply and demand, the concept most of us seemed to remember the most from previous economics...
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... a facility for self-expression, not only in writing but also in using additional aids, such as statistics and diagrams, where appropriate; the habit of using works of reference as sources of data specific to economics; the habit of reading critically to gain information about the changing economy we live in; and an appreciation of the methods of study used by the economist, and of the most effective ways economic data may be analysed, correlated, discussed and presented. Course Objectives: Demonstrate knowledge and understanding of the specified content; Interpret economic information presented in verbal, numerical or graphical form; Explain and analyse economic issues and arguments, using relevant economic concepts, theories and information; Evaluate economic information, arguments, proposals and policies, taking into consideration relevant information and theory, and distinguishing facts from hypothetical statements and value judgements; and Organise, present and communicate economic ideas and informed judgements in a clear, logical and appropriate form. Course Assessment: Course work worth 30% (2 assignments and 1 in-class test) Final exam 70% Students must get 40% of the coursework before they can sit for the examination. Page 1 of 6 Course Outline WEEK LECTURE (Two Hours) 1 (2 Hrs) CONTENT...
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...Elasticity measurs the responsiveness of quantity demanded to changes in price. Elasticity tells us how the change in one thing has an impact on another thing. This is important because it helps businesses decide on the best course of action to take regarding their business prices. It also helps the government and the business to understand if what they are doing is producing results or not.The rate at which the quantity demanded changes in response to a change in price is called price elasticity of demand. When a large change in price has a small effect of demand this is called inelastic demand, but when a small change in prices has a big effect on demand it is called elastic demand. If the price of a laptop increases by 20% and there is a 40% drop in the quantity demanded then the price elasticities of demand would be -2 which means that it would be inelastic because the absolute value of elasticity is less than 1. If the price of a pack of cigarettes increases by 10% and there is a 5% drop in the quantity demanded then the price elasticities of demand would be –0.5 which means that it would be inelastic because the absolute value of elasticity is less than 1. Of the above examples laptop is more elastic because it is a luxury good and consumers may reduce its use or substitute it for something else in the case of a rise in prices. Cigarettes are an addictive commodity which may cause many consumers not to reduce their consumptions of them which makes it the least elastic...
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...C h a p t e r 4 ELASTICITY Topic: Calculating Elasticity Skill: Conceptual Price Elasticity of Demand 4) Topic: The Price Elasticity of Demand Skill: Conceptual 1) The slope of a demand curve depends on A) the units used to measure price and the units used to measure quantity. B) the units used to measure price but not the units used to measure quantity. C) the units used to measure quantity but not the units used to measure price. D) neither the units used to measure price nor the units used to measure quantity. A) B) C) D) When the quantity of coal is measured in kilograms instead of pounds, the demand for coal becomes more elastic. less elastic. neither more nor less elastic. undefined. Answer: C Topic: Calculating Elasticity Skill: Recognition 5) The price elasticity of demand equals A) the change in the price divided by the change in quantity demanded. B) the change in the quantity demanded divided by the change in price. C) the percentage change in the price divided by the percentage change in the quantity demanded. D) the percentage change in the quantity demanded divided by the percentage change in the price. Answer: A Topic: The Price Elasticity of Demand Skill: Conceptual 2) The price elasticity of demand depends on A) the units used to measure price and the units used to measure quantity. B) the units used to measure price but not the units used to measure quantity. C) the units used to measure...
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...Elasticity of Demand Concepts and Measurement In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. Demand elasticity is important because it helps firms model the potential change in demand due to changes in price of the good, the effect of changes in prices of other goods and many other important market factors. A firm grasp of demand elasticity helps to guide firms toward more optimal competitive behavior. Rate at which demand changes due to particular change of price of the commodity or price of other commodity or income of the consumer is called elasticity of demand. Elasticities greater than one are called "elastic," elasticities less than one are "inelastic", and elasticities equal to one are "unit elastic". Elasticities equal to infinity is called "perfectly elastic demand". Also elasticities equal to zero is called "perfectly inelastic demand". Demand elasticity is a measure of how much the quantity demanded will change if another factor changes. One example is the price elasticity of demand; this measures how the quantity demanded changes with price. This is important for setting prices so as to maximize profit. When price elasticity of demand is elastic, the firm should lower prices, since it will result in a big uptick in demand, increasing your total revenue. When price elasticity of demand is inelastic, the firm should increase prices because there will be only a...
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