StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Price Elasticity of Demand - Term Paper Example

Comments (0) Cite this document
Summary
A writer of the paper "Price Elasticity of Demand" outlines that when elasticity is equal to one it is called unit elasticity and the change in quantity demanded causes a proportionate change in price. So a price change in either direction will not yield a change in revenue…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.5% of users find it useful
Price Elasticity of Demand
Read TextPreview

Extract of sample "Price Elasticity of Demand"

Download file to see previous pages When elasticity is greater than 1 the quantity demanded changes to a greater degree than the change in price. The demand curve aligns increasingly aligns itself to the x-axis in the case of near infinite elasticity, meaning that the quantity demanded is particularly responsive to changes in price. This case is also known as being perfectly elastic and is shown in the graph below: From this demand curve, it is evident that an extremely minute change in price would lead to an infinitely large change in quantity demanded. This scenario can be applied to perfectly competitive markets or luxury items. When elasticity is less than one the quantity demanded response insignificantly to changes in price. Increase the price would increase revenue, and vice versa. As the elasticity approaches 0, the demand curve becomes parallel to the y-axis. So the quantity demanded becomes more or less independent of price. This is known as being perfectly inelastic demand. Integration is the concept of supply chain management that origins from microeconomics. The basic idea is to partner or collaborate with all the stakeholders relevant to the production of goods and services offered by an organization. There are several ways of doing so; we will look at each in detail along with its advantages and disadvantages. In horizontal integration, an organization merges with its competitor(s) that produce similar products. Advantages - The basic advantage of horizontal integration is that it may provide economies of scale. Increased distribution capacity and market access are also possible, leading to greater market share. Disadvantage - the major disadvantage is that since horizontal Integration restricts competition it might lead to the creation of conglomerates or even monopolies. This, in turn, can be harmful to the interests of end-consumers. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Price Elasticity of Demand Term Paper Example | Topics and Well Written Essays - 2000 words”, n.d.)
Price Elasticity of Demand Term Paper Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/macro-microeconomics/1505382-price-elasticity-of-demand-essay
(Price Elasticity of Demand Term Paper Example | Topics and Well Written Essays - 2000 Words)
Price Elasticity of Demand Term Paper Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/macro-microeconomics/1505382-price-elasticity-of-demand-essay.
“Price Elasticity of Demand Term Paper Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/macro-microeconomics/1505382-price-elasticity-of-demand-essay.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Price Elasticity of Demand

Price Elasticity of Demand

...Price Elasticity of DemandPrice elasticity of demand refers to how sensitive the amount of a good or service that is highly needed respond to change in prices. A good or service with many close substitutes will have its demand being more elastic since the customers can very simply adjust to another good due to increase in price of that good in comparison to other goods in the marketplace. On the contrary, a produce with little or no close substitutes will have inelastic demand since the customers have no other produce to adjust to. Price elasticity of demand (Ed) = percentage in amount demanded Percentage of change in price = Δqd/qd...
7 Pages(1750 words)Coursework

Price Elasticity of Demand

In understanding this given economic issue, we need to study the application of Law of Supply and Demand and price elasti of demand in our product markets. From there we can see how the simple tools of demand and supply can affect the prices of goods, the consumers’ spending behavior and the businesses’ decisions and the operations of the entire economic system. If the demand for corn increases due to its use as an alternative energy source, there will be a decrease in the supply of corn's substitute such as soybean. This is because change in the price of related goods is a determinant of demand (McConnell & Brue, 2002). As corn and soybean are substitutes, one can be used in place of the other, so when the demand for corn is incr...
2 Pages(500 words)Essay

Price Elasticity of Demand

... to the alternate energy the increase in demand would lead to a significant change in price because of the fact that the price elasticity of demand is elastic. As far as total revenue is concerned there would be an increase in it because the new demand is being served with the higher price. References Top of Form Case, K. E., & Fair, R. C. (2004). Principles of economics. Upper Saddle River, NJ: Pearson/Prentice Hall. Bottom of Form... the increase in such demand. The price elasticity of demand is defined as the percentage change in quantity demand divided by the percentage change in price. This is the basic calculation of the...
2 Pages(500 words)Essay

Price Elasticity of Demand

...as necessities. Therefore the price elasticity of demand for them would not exceed 1. In this case, Mylan Laboratories has increased their prices by close to 600% and this will have an effect on the demand as many people cannot afford the extra expense that is accompanied by the price increment. There are a number of factors that will inform the elasticity of the demand. First, the availability of substitutes is a major determinant (Wall & Griffiths 2008). With the presence of generic drugs that are supplied by competitors, the increase in prices of the patented Mylan Laboratories’ drugs...
4 Pages(1000 words)Essay

Price Elasticity of Demand

... One of the major concepts of microeconomics is price elasticity of demand, which refers to sensitivity levels of demand for a given product or service to changes in its price. Elasticity of demand co-efficiency is the percentage change in the quantity of a product or frequency of a service in reference to percentage variation in price. Changes in price levels and quantity conversely relate to each other, with the obvious implication of a decrease in product demand with increase in its price. Demand on the other hand refers to the amount of a commodity that buyers are willing and capable of buying at a given price level. Many factors determine price elasticity of demand in a free market economy. Firstly, the product uniqueness...
4 Pages(1000 words)Essay

Demand and Price Elasticity of Demand

...? Demand and price elasti of demand Part A. According to the article, a drop in the price for Bordeaux wine could increase the sales. This strategy is explained by the price concept of demand elasticity. Whenever a firm comes up with a pricing strategy it needs to analyze all the outside factors which affect the firm’s decisions. These factors may include the consumers, and the market competition among other factors. Considering the price strategy that is demand based, the market would always set out a price for a commodity after researching the desires of consumers and verifying the price range which is acceptable to the market target. In the case of Bordeaux, the consumers had proposed a low wine price. This implies that reducing...
8 Pages(2000 words)Case Study

Price elasticity of demand

...Price Elasti of Demand Price elasti of demand is defined as the elasti that measures the nature and degree of the relationship betweenchanges in quantity demanded of a good and changes in its price. ("Price") Its mathematical equation therefore is expressed by this expression: Price Elasticity of Demand = [Q2 - Q1] / [0.5*(Q1 + Q2)] [P2 - P1] / [0.5*(P1 + P2)] In order to find out the elasticity of apples in the market, the following computation is derived: Elasticity of demand of apples = [21 - 30] / [0.5*(30 + 21)] [3.45 - 3.0] / [0.5*(3.0 + 3.45)] = [- 0.450] [3.225] Ed of apples = 2.52 Based from the result of the computation that is 2.52 as the elasticity of demand of apples, it can...
2 Pages(500 words)Essay

Price Elasticity Of Demand

... Coarse: Price Elasti of Demand Introduction This paper gives a clear insight on the microeconomic element of price elasticity of demand. It covers all the formulas that are used in computing price elasticity of demand, cross elasticity of demand and income elasticity of demand. Finally the cover interprets different graphs and signs of coefficient of elasticity of demand. Price elasticity of demand can be defined as “a measure of responsiveness or sensitivity of consumers to price change”. (Cordes, J. J et al p102)With some products, consumers have a higher responsiveness to price changes. (Daly H.E, 2004 p146) These products are said to have a relatively elastic demand. (Daly H.E, 2004 p146) On the other hand, some products have a low...
5 Pages(1250 words)Term Paper

Price Elasticity of Demand

Price Elasticity of Demand
Effect of Increase in Demand on Supply of Substitute Good
If corn is discovered as an alternative source of energy, its demand increases prompting a scarcity of corn. The buyers will compete for the scarce corn thereby pushing the price of corn up. This acts as an incentive for farmers to produce more corn and sell at high price as the law of supply states that price of a good is directly related to its supply; if price increases, quantity supplied increases (Tucker, 2009). However, the supply of corn also depends on availability of resources or inputs such as land and labor, prices of substitutes, and number of farmers. If more farmers decide to produce corn, the demand will be met. The price o...
2 Pages(500 words)Assignment

Price elasticity of demand

...; if the product satisfies basic needs or necessities such as medical care, basic food stuff and housing, then the price elasticity of such products will be inelastic, ceteris Paribas. However, if the product in question satisfies other luxurious wants such as entertainment and swimming pools, then its price elasticity of demand will be elastic. Time elapsed since price change; if it is in the short run, the price elasticity of that given product will be inelastic because consumers do not have adequate time to respond to such a price change. If it is in the long run, the price elasticity of such goods will be elastic, ceteris paribus since consumers will have enough time to respond to such price changes that my involve switching...
1 Pages(250 words)Essay

Personal and Social Context of Agnes Price

...Discussion of Need in Relation to the Personal and Social Context of Agnes Price Submitted November 25, 2005 ID Abstract This paper will include an assessment of a 64 year old woman who lives with family and is suffering from depression. The assessment will be made based on Bowen’s System Theory with consideration for the fact that Agnes is in the latter part of her life span and has a number of stressful conditions to deal with. This case is being opened as a result of concerns raised during a family health visitor’s regular visits to the home where Agnes resides with her daughter and the young woman’s family. In addition to creating a case plan for Ms. Price this document includes a discussion of the rationale, theory and ethical...
7 Pages(1750 words)Case Study

A Stable Demand for Money Function is Necessary for the Success of Monetarism

... as exogenous. As a rule, the causation will run from left (MV) to right (PT). The increase in money supply will result to an exact proportionate increase in the Price Level (P) since Velocity (V) and Level of Transactions (T) are fixed and money supply (M) is exogenous. Therefore, we can conclude that a sudden increase in the money supply can result to price inflation. This is the main reason why a stable demand for money function is important. Because when M increases given that T and V are fixed; therefore, Money (M) and Price (P) will be greater than the Level of Transaction (T) and Velocity (V). Let us look at the situation wherein the supply of money is more than the demand for money. (See Figure 1 on page 5) The purchasing...
8 Pages(2000 words)Term Paper

Marks and Spencer: Factors Affecting the Supply and Demand

...Marks and Spencer - Factors Affecting the Supply and Demand - Total Number of Words: 2,075 Introduction Marks & Spencer (M&S), a British-owned retail company, was established by Michael Marks and Thomas Spencer back in 1884. (Marks & Spencer, 2008a) Despite the tight competition in the global market, M&S has maintained its reputation as one of the largest high-priced merchandise seller of food, wine and clothing not only in the UK market but also in more than 30 countries around the world. (BBC News, 1998) In general, Marks & Spencer’s food products is not limited to the bottle of wines, chocolates, and candy bars we see at the store counter. The company also offer the public other food items such as personalized cakes for special...
8 Pages(2000 words)Case Study

Sweatshops: Social Justice and the Demand for Cheap Goods

...Sweatshops: Social Justice and the Demand for Cheap Goods Sixteen hours a day, six days a week, you work in a garment factory in India to sew clothing for Gap Corporation. You eat mosquito-covered rice, twice a day if you are lucky, and use an outdoor latrine overflowing with the waste of your fellow workers. A rubber pipe reminds you to work faster. Cry over your conditions and an oily cloth is stuffed in your mouth. And you are only ten years old. This story is not from some sordid Charles Dickens’ novel. It happened to real children in the bright and shining economy of 2006 (Ehrenreich, 2008). Sweatshop conditions are not always as horrendous as those depicted in this story, but in a relative way, garment manufacturing offends every...
8 Pages(2000 words)Case Study

Binomial Method in Option Price

...BINOMIAL METHOD in OPTION PRICING This research illustrates the use of the Binomial method for pricing European and American options . These options have been priced by generating the Binomial tree for the stock prices and then for the options . This research deals with the important concepts related to option pricing with methods like Black Scholes method and the Binomial method. The fundamentals of option theory , European options , American options, put call parity have been discussed in the course of the research . The relationship between these two methods has also been highlighted . The step by step procedure in option valuation using the Binomial method , explains the simplicity and accuracy of the method . The Binomial method...
48 Pages(12000 words)Assignment

Impact of Forecasting Demand in Food and Beverage Service Organisation

Purchasing, storage, and production scheduling are some of the basic things needed to be adjusted periodically based on the demand in the market. It is not wise to purchase too many materials at a time when the demand was less. The to and fro movement of the material is essential for the smooth functioning of the storage area. Goods purchased and stored in the store must be despatched to the production area periodically before the expiry date to ensure that the organization might not suffer. But if the demand was poor, it is not possible to ensure the despatch of goods to the production unit which will result in wastage of materials. Generally, Purchasing, Storage and Production are the three areas in any manufacturing unit which...
6 Pages(1500 words)Research Paper

The Inventory Theoretic Model of the Transactions Demand for Money

...Critically appraise the inventory theoretic model of the transactions demand for money Table of Contents Critically appraise the inventory theoretic model of the transactions demand for money 1 Table of Contents 1 Introduction 2 The Inventory Theoretic Approach 3 Transactions Demand for Money 4 Criticisms against the Baumol-Tobin Inventory Theoretic Approach for Money Demand 5 Conclusion 6 Introduction The original proponent for the determinants of the demand for money was John Maynard Keynes. He suggested that the demand for money is basically dependent on three components, namely, the speculative demand for money, the precautionary demand for money and finally the transactions demand for money. All the three types of demand...
8 Pages(2000 words)Case Study

1.Describe how equilibrium occurs using the aggregate supply (AS) and aggregate demand (AD) framework. Use this framework to explain why real GDP fluctuates around potential GDP with specific reference to the current state of the UK economy

Aggregate demand curve represents the desired spending, consumer behaviour and the buying of equipment by governments and foreigners. The aggregate demand rises with the increase in expenditure caused by increased optimism by the households on lifetime incomes and increased need for the product. The combined monetary assets and the decrease in interest rates stimulate the desire to spend by the firms and households. Low interest rates reduce the saving reward and borrowing costs for households, but for businesses, this reduces the borrowing costs for investing in equipment and plant (James, Walte and James 2006, p. 777-790).
The aggregate demand curve slopes downwards due to the fixed nominal value for some assets, particularl...
6 Pages(1500 words)Essay

A critical literature review and initial conceptual framework(The Impact of Price Changes on the Brand Equity of Toyota in Saudi Arabia)

... increased significantly and 1986 when energy prices decreased significantly. Research findings indicate that while energy prices corresponded with consumer spending, it was not the primary determining factor (Edelstein & Killan, 2009). Verboven (2002) examined empirical data of automobile purchasing in Europe where consumers can choose between diesel and gasoline vehicles. Diesel vehicles get better mileage on the diesel and diesel attracts less tax than gasoline. Yet, consumers in Europe are more partial to gasoline vehicles (Verboven, 2002). Moreover, despite the perceived high demand for fuel efficient cars such as hybrid cars, annual sales did not meet expectations (Read, 2012; Tuttle, 2012). It would therefore appear...
40 Pages(10000 words)Essay

The Scope and Scale of the Impact of the Demand for Services on the Management of Resorts and Spas

... in the delivery of resort and spa services to potential customers; (2) to offer a wider range of programs, events, services, and therapeutic activities; (3) to always be informed of the changes in the preferences and demographic characteristics of resort and spa customers; and (4) to satisfy the needs of customers, from pleasure to health and wellness. Management scholars recommended strategies that address customers’ needs, within the framework of the four Ps: price, promotion, place and product. They suggested that resort and spa managers should be flexible, versatile, cope with the changes in the preferences and demands of resort and spa customers, and keep on enhancing dissemination of information about the quality of resort and spa...
8 Pages(2000 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Term Paper on topic Price Elasticity of Demand for FREE!

Contact Us