Elasticity

ELASTICITY Elasticity simply pertains to the responsiveness of dependent variables in frugal calculations to variegates in independent variables; these variables being measurable quantities, some(a) of which (dependent) remove if others (independent) do. The term was invented by Alfred Marshall, and is used to measure relationships of precaution and pray, or of various factors in production. There be some(prenominal) shipway in which elasticity is measured. Price elasticity of require measures how overmuch a (marginal) transfer in the footing of a correct affects demand for that full, all others factors remaining constant. It is measured by dividing the symmetrical multifariousness in demand by the sexual intercourse change in the price. For example, if a goods price is raised to 106 from a service line of 100 (a change of +6), and the bar bought locomote from 100 to 90 (a change of -10), the resulting percentage changes are 10/100 x 100 = -10% and 6/100 x 100 = +6%. Dividing the proportionate change in quantity (10%) by the proportionate change in price (6%) gives 1.66. Because the firmness of purpose is more than 1 it means that the good is price-elastic and demand conduct fall by pro rata more than the step-up in price; therefore, redden though the price has increased, total scotch consumption on the good by consumers go out fall.

If the service is less than 1, the good is price inelastic and demand will not fall proportionately more than the increase in price; therefore, total expenditure on the good by consumers will rise. Cross-price elasticity of deman d measures how much demand for hotshot good! is affected by a change in price of another good. The cross-elasticity is calculated by dividing the proportional change in the quantity of X by the proportional change in the price of Y. If the goods are substitutes (different vanes of cola, for example) an increase in the price of brand X will result in an increase in sales of brand Y, and so cross-elasticity is positive. If the goods are complemental (computers and...If you want to get a full essay, order it on our website: BestEssayCheap.com

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