Search
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.

# Elasticity of Demand: A Close Investigation - Essay Example

Summary
The writer of the current essay seeks to examine the concept of price elasticity introduced by Dr. Marshall. Furthermore, the assignment reveals an in-depth analysis of the topic, discussing the determinants of price elasticity of demand and describing its components…

## Extract of sampleElasticity of Demand: A Close Investigation

Download file to see previous pages... Price elasticity differs for different commodities. Usually, it varies on a scale of zero to infinity where possible cases can be equal to zero, unity, less than and greater than one (Figure 1). These cases are called degrees of price elasticity of demand which are briefed as below (Mankiw 2008:93):
According to Stonier and Hague, “income elasticity of demand shows the way in which a consumer’s purchase of any good changes as a result of a change in his income” (Lekhi 2007:45). Thus, income elasticity represents the ratio of percentage change in quantity demanded to a percentage change in income and is expressed as:
An example illustrating income elasticity of demand is supposed when our monthly income is \$ 500; the demand for ice-creams is of 10 units. However, if monthly income rises to \$ 1000, the demand for ice-cream units also rises to 20 units. Thus, income elasticity, in this case, would be 2 (greater than 1).
The income elasticity of demand is usually positive for wines, quality chocolates, mobile phones, leisure facilities and other luxury items. However, it is low for staple foods and mass transportation (Tutor 2u n.d).
Nature of commodity- commodities also vary according to their categories. Price elasticity of necessary commodities of life is usually inelastic as people will buy them regardless of a change in price. Rice, salt and food grains fall into this category. Demand for luxury goods is elastic as people buy more of them at lower prices and vice versa. However, luxury to a poor man can be the necessity to the rich. Hence, this thing has to be expressed carefully.
A number of uses- demand is said to be elastic if it is put to multiple uses and inelastic if it is confined to a single use. Multiple-use goods are found to have more elastic demand.  ...Download file to see next pagesRead More
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Price Elasticity of Demand
Individuals would not buy the product as they used to and the quantity demanded will fall whilst the firms would supply more of the product i.e. the supply curve will move to the right. In the case above, if the demand for corn increases, there would be a shift in the demand curve to the right.
2 Pages(500 words)Essay
Price Elasticity of Demand

The researcher states that the most common description as crafted by Alfred Marshall is the percentage change of the quantity of a product demanded in response to a one percent change in the price of the product with all other factors remaining constant. When the change in demand is relatively unaffected (where the PED is less than 1), the goods sold are considered to be inelastic.

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. The 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.

4 Pages(1000 words)Essay
Evaluation of Demand Elasticity
In the recent studies, the economists suggest that price level for a product introduced by the members of a company largely depends on the elasticity of market demand for the product. Price Elasticity is basically the degree of responsiveness of the change in quantity demanded for a product with respect to the change in the price level of the product.
8 Pages(2000 words)Research Paper
Elasticity of Demand Essay
(Alfred Marshall, Principle of Economics(1890)) In the words of Paul A. Samuelson, "price elasticity of demand indicates the responsiveness of quantity demanded to the changes in market price." (Anthony Samuelson, Foundations of Economic Analysis, 1947).
7 Pages(1750 words)Essay
Elasticity of Demand
When we talk of product price, we mean market price. That is the price at which the product is sold to all buyers in the market. The quantity of a product that we purchase at a certain price is called the demand of the product. Price of a product and its quantity demanded are closely related in the sense that each of these has a bearing on another.
10 Pages(2500 words)Essay
Supply, Demand and Elasticity
The theory of supply and demand attempts to "describe, explain, and predict changes in the price and quantity of goods sold in competitive markets. The model is only a first approximation for describing an imperfectly competitive market." (Supply and Demand, 2006).
3 Pages(750 words)Essay
The elasticity of demand

This paper illustrates that own price elasticity of demand is higher for goods for which consumers have readily available substitutes as in that case in case of very small changes in own prices, ceteris paribus, the substitutes become more attractive. Further, short-term price changes lead to greater sensitivity to demand compared to long-term changes.

4 Pages(1000 words)Essay
Elasticity of Demand
In other words PED, gives the percentage change in the quantity demanded as a response to a change in price mostly by one percent. It should however be noted that this is based onceteris paribus, which means that all
1 Pages(250 words)Essay
Price elasticity of demand
The easier it is to swap, the more elastic the demand of such a product is (Mankiw 90). Type of want is satisfied by product; if the product satisfies basic needs or necessities such as medical care, basic food stuff and housing, then the price elasticity of such
1 Pages(250 words)Essay
Let us find you another Essay on topic Elasticity of Demand: A Close Investigation for FREE!
+16312120006