Before answering how elasticity affects total revenue, you need to recall the following concepts in economics:Own-price elasticity of demand. It measures the responsiveness of changes in quantity demanded when prices change. Demand is price
Microeconomics
Inferior Goods: Meaning, Its Price Elasticity
Inferior goods are groups of goods whose demand falls when consumer income rises. And, in economics, the demand for goods has a negative income elasticity (<0).Inferior good elasticityWe use income elasticity to categorize goods as
How substitution affects elasticity?
The presence of substitution affects elasticity because it provides alternative choices in consuming products or servicesIf a substitute product is available, consumers tend to turn to these alternative products when the price of a product or
Own-Price Elasticity of Demand: Formula, Calculation, Types, Importance
Own-price elasticity of demand measures how responsive demand is when the price of goods changes. It is elastic or responsive when a slight change in price causes a more significant change to the quantity demanded. In contrast, when the quantity
Cross-Price elasticity: Meaning, Formula, How to Calculate
The cross-price elasticity of demand is a measure of the responsiveness of demand for goods when the price of related goods changes. In the analysis, we assume other factors do not change.We mean, related products refer to substitute or
Normal Goods: Meaning, Elasticity
Normal goods are groups of products whose demand increases when consumer incomes rise. Conversely, when consumer incomes fall, demand for them also falls.Various items of your daily needs, such as soap, tea, clothes, coffee, are examples of
Unitary Elastic of Demand: Meaning and Explanation
Unitary elasticity of demand is a situation in which the price change affects the quantity demanded at an equivalent percentage. For example, when the price of a good rises 3%, the quantity demanded decreases by 3%. And, when the price drops by 3%,
Perfectly Elastic Demand: Definition, How To Calculate, Curves
Perfectly inelastic demand is when the quantity demanded is unresponsive to the price change. Changes in the price of a product don't affect the quantity demanded to rise or fall. When the price rises, demand will remain the same. Vice versa, when
Income elasticity of demand: Meaning, Formula, How to Calculate
How responsive changes in income affect demand is income elasticity (income elasticity of demand). Income is one of the determinants of demand for a product—the demand quantity changes when income changes.In general, the quantity of demand
Excess Supply: Meaning, How to Calculate, Causes, Impacts
Excess supply occurs when the quantity supplied is higher than the quantity demanded. In this situation, price is above the equilibrium price, and, therefore, there is downward pressure on the price.This term also refers to production surplus,
Market Demand: Definition, How to Calculate, Determinants
What's it: Market demand is the sum of individual demand in the market at a given price. Economists define demand as our willingness and ability as consumers to buy goods or services for any given price combination.The more consumers
Excess Demand: Meaning, How to Calculate, Causes
Excess demand occurs when the quantity demanded exceeds the quantity supplied. In this situation, the market price is below the equilibrium price. And, when the mechanism works, the price will rise towards its new equilibrium.The term we also