Economic And Management Essay Example | Topics and Well Written Essays - 1250 words

Economic And Management - Essay ExampleElasticity is an easy way of enumerating cause and force correlations. It is described normally as a mathematical measure of the responsiveness of one economic variable criterion (the dependant variable) following a alter in anformer(a) influencing variable (the independent variable), ceteris paribus.Now we shall agnize what Price Elasticity of demand (PED) is, it is the measure of responsiveness of demand for a good following an revise in its own price. If demand is elastic, then a little transform in price go forth consequence in a comparatively big change in amount demanded. However, if price increases by too much and quantity demanded descends vaguely, then demand would be price inelastic. (Hubbard and OBrien, 2008)If co-efficient of PED = 0, it means that demand is short inelastic. This means that any change in price whether increase or decrease does change the quantity demanded. Hence making its demand curve a vertical line in pric e(x axis) to quantity(y axis) space.If co-efficient of PED is between 0 and 1, when we get values of PED between 0 and 1 than we say PED to be inelastic this means that lot change in demand is lesser than percentage change in price. Producers know that the change in demand will be proportionalityately smaller than the percentage change in price. ... Producers know that the change in demand will be proportionately smaller than the percentage change in price. thus Demand curve will be a very steep slanting line in price(x axis) to quantity(y axis) space.If co-efficient of PED = 1, when a percentage change in price changes the percentage of quantity demanded by the same proportion the PED is said to be unitary elastic. For grammatical case a 10% rise in the price of apples causes a 10% fall in its quantity demanded.If co-efficient of PED 1, when the value of PED exceeds 1 then demand is said to be elastic, which means that a % change in price causes the quantity demanded to change by more than proportionate. For example a 10% rise in prices of apples cause its quantity demanded to drop by 15%. (Lipsey & Chrystal, 2007 Sloman, 2006)Factors find out Price Elasticity of DemandNow let us take a look at the key factors that determines the PED for goods and aids. They are as followsThe range of near substitutes for a product / attractiveness of the good- the more the go of substitutes of a good the more elastic would be its demand because consumers can easily exploit to other alternative good. For example cokes perfect substitute is Pepsi, and therefore if coke raises its price people will turn to Pepsi instead. And the more the product is unique the more inelastic would be its demand. (Tucker, 1999 Samuelson & Nordhaus, 2001)The fee of toggling amid different products - there may be noteworthy dealings expenses caught up in changing among dissimilar goods and services. For example, mobile phone service suppliers may incorporate penalty clauses in agreements or persevere on 12-month