Elasticity

ELASTICITY Elasticity simply pertains to the responsiveness of dependent variables in frugal calculations to variegates in independent variables; these variables being measurable quantities, some(prenominal) of which (dependent) remove if others (independent) do. The term was invented by Alfred Marshall, and is used to measure relationships of missionary post and pray, or of various factors in production. There be some(prenominal) shipway in which elasticity is measured. Price elasticity of adopt measures how overmuch a (marginal) channelise in the determine of a correct affects demand for that full, all others factors remaining constant. It is measured by dividing the symmetrical win over in demand by the sexual congress change in the price. For example, if a goods price is raised to 106 from a service line of 100 (a change of +6), and the measure bought fall from 100 to 90 (a change of -10), the resulting percentage changes are 10/100 x 100 = -10% and 6/ 100 x 100 = +6%. Dividing the proportionate change in quantity (10%) by the proportionate change in price (6%) gives 1.66. Because the closure is more than 1 it means that the good is price-elastic and demand lend fall by pro rata more than the addition in price; therefore, redden though the price has increased, total stinting consumption on the good by consumers ordain fall.

If the say is less than 1, the good is price inelastic and demand will not fall proportionately more than the increase in price; therefore, total expenditure on the good by consumers will rise. Cross-price elasticity of demand measures h ow much demand for unrivalled good is affec! ted by a change in price of another good. The cross-elasticity is calculated by dividing the proportional change in the quantity of X by the proportional change in the price of Y. If the goods are substitutes (different vanes of cola, for example) an increase in the price of brand X will result in an increase in sales of brand Y, and so cross-elasticity is positive. If the goods are completing (computers and...If you want to get a full essay, order it on our website: BestEssayCheap.com

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