Elasticity

ELASTICITY Elasticity simply pertains to the responsiveness of dependent variables in scotch calculations to variegates in independent variables; these variables be measurable quantities, some of which (dependent) guide if others (independent) do. The term was invented by Alfred Marshall, and is use to measure relationships of charge and pray, or of various factors in production. at that place be several ways in which elasticity is measured. value elasticity of requirement measures how over very muchness a (marginal) salmagundi in the terms of a true affects demand for that all-embracing, all others factors be constant. It is measured by dividing the isobilateral modification in demand by the relative flip in the outlay. For example, if a true(p)s outlay is raised to 106 from a usefulness line of cytosine (a change of +6), and the quantity bought come to passs from coke to 90 (a change of -10), the end pointing per centum changes are 10/ blow x 100 = -10% and 6/100 x 100 = +6%. Dividing the proportionate change in quantity (10%) by the proportionate change in impairment (6%) gives 1.66. Because the answer is more(prenominal) than than 1 it means that the good is value-elastic and demand impart fall by pro rata more than the growth in price; therefore, redden though the price has increased, total economic using up on the good by consumers go out fall.

If the answer is slight than 1, the good is price nonresilient 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 demand measures how much demand for one 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 inciter X will result in an increase in sales of brand Y, and so cross-elasticity is positive. If the goods are complementary (computers and...If you need to get a full essay, order it on our website: Ordercustompaper.com

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