A. Elasticity of demand is the consumer’s response to the change in price. The demand of a product varies with the price. There are three categories of elasticity of demand; elastic, inelastic and unit elasticity.
Elastic demand is one in which the change in quantity the consumer demands is due to the change in price of the product being larger. Inelastic demand is one in which the change in quantity demanded due to a change in price is small. Inelastic demand usual causes a negative effect on the product. Elasticity of demand is measured by dividing the percentage change of the quantity demanded by the percentage change of the price.
Unit elastic is any change in price that causes an equal change in quantity. Price changes and quantity changes stay the same. The percentage change in quantity is equal to the percentage change in price. Unit elastic supply will occur when the seller can choose a substitute for the higher price product.
B.The measure of the rate of response of the amount of a demanded product due to the price change of other goods is cross price elasticity demand. When products are substituted with a cheaper product, we expect to see the consumer purchase more than one of the product when the substituted price is increased. If the products are similar we should see a price raise in the product cause the demand for both products to drop.
The Essay on Elasticity Of Demand Price Change Income
... increase in quantity demanded -- a situation where demand is price sensitive or price elastic. The price elasticity of demand measures the responsiveness of quantity demanded to a change in price, with all ... good is perfectly inelastic. A change in price will have no influence on quantity demanded. The demand curve for such a product will be vertical. If ...
C.Income elasticity is how much of your income will spend on different types of products. Your income decides what type of products is purchased. The percentage of your income spent on normal goods which include a vehicle payment, groceries and normal goods you would purchase every month. Normal goods are also referred to as Superior goods. Superior goods have positive income elasticity. With superior goods if income raises the expenditures will also rise. Superior goods are also a wide quality distribution.
Inferior goods are inelastic; depending on your income you may or may not purchase inferior goods. Inferior goods have negative income elasticity. The raise in income leads to a fall in the demand and may lead to changes to a more luxurious substitute.
In a given market the income elasticity of demand for products can vary and the perception of the product must differ from consumer to consumer.
D.If the price of coffee increased by $0.25 per cup a consumer may decide to replace their cup of coffee with a caffeinated fountain drink for a lower price. This would cause the demand for coffee to decrease. However if the price of caffeine in general increased there may not be much of a change in the demand.
E. If the price of a monthly car payment increased by 50% and the price of deodorant, which was also a monthly purchase, increased by 50% a consumer would more than likely still pay for the deodorant even though the price has increased. The car payment takes a larger portion of the consumers monthly income therefore the consumer may be unable to afford the increase in the car payment.
F.The response to a large increase on a short run would initially be a quick adjustment for a consumer. For example, if a consumer had to purchase an item for work but was running late for work and found the price of the product had greatly increased, they would purchase the item anyway based on the lack of decision time. The initial response to a larger increase over a long run, the consumer would not purchase the item and would try to locate a cheaper alternative.
The Essay on Elasticity Of Demand Price Income Good
... the desire for the good is satisfied as consumption increases is also a determinant of income elasticity of demand. The more quickly people ... of the responsiveness of demand for one product to a change in the price of a complement or substitute good. The formula for ... of demand for their product when considering the effect on the demand for their product of a change in the price of a rival's product ...
G.In the graphs the beginning price range is $80.00. Between the price ranges of $80 to $200 the quantity of the product increases from 1 to 4 which means the demand for the product is elastic (price is down and total revenue is down).
When the quantity of the product increases from 4 to 5 the price remains the same at $200 which means the demand is unit elastic (when the price is down and the total revenue is the same).
When the price of the product is between $200 and decreases to $0 the quantity of the product increases to 9 which causes the demand to be inelastic (when price is down and total revenue is down) which means the supply will increase.
When the quantity demand is between 1 and 4 the beginning price is $80 to the ending price of $50. During this time the demand for the product is elastic.
When the quantity demand is between 4 and 5, the beginning price is $50 and the ending price is $40. During this time the demand for the product is unit elastic.
When the quantity demand is between 5 and 9, the beginning price is $40 and the ending price is $0. During this time, the demand for the product is inelastic.
