What's it: Elasticity of demand measures the responsiveness of a product's demand to changes in determining factors such as its price (own-price), the price of other goods, and income. To calculate this, you divide the percentage change in
Elasticity of Demand
Elastic Demand: Meaning, How to Calculate It
Elastic demand means the quantity demanded is responsive to price changes. When prices rise by 5%, according to the law of demand, the quantity demanded falls by more than 5%. Conversely, when prices fall by 5%, the quantity demanded rises by more
Necessities: Meaning, Elasticity
Necessities are types of normal goods that their demand is inelastic in income. When consumer income changes, their demand quantity also changes but at a lower percentage than the change in income. For example, if consumer income rises from 5%, then
Luxury Goods: Meaning and Its Elasticity
Luxury goods are types of goods whose demand is higher than the increase in consumer income. Consumers ask for more when their income rises.Although they don't always have a high-quality connotation, they are often considered to be at the top in
How elasticity affects total revenue
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
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
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
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