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ECONOMICS

price elasticity of demand

QuestionAnswer
define elasticity of demand elasticity of demand measures the change in the quantity demanded of commodity due to change in price of income, income of consumer , price of related good
price elasticity of demand when change in quantity demanded is measured with respect to change in price of the commodity . it gives us the percentage rise in elasticity of demand due percentage fall in the price of the commodity
income elasticity of demand when change in quantity demanded is measured with respect to change in income of the buyers .
cross elasticity of demand when change in quantity demanded is measured with respect to change in the price of the relative good
what are the 3 observations under total expenditure method 1.if rise or fall in price of a commodity doesnt effect the total expenditure of the commodity then elasticity of dmeand is unitary 2.if fall in own price of the commodity leads to rise in total expenditure or vice versa then elasticity of demand is greater then unitary 3. if fall in own price of the commodity leads to fall in total expenditure or vice versa then elasticity of demand is lesser then unitary
which has a higher elasticity of demand flowers of (-)9 or toys of (-)5 we are suppposed to ignore the sign so flowers has a higher demand
when does Ed=∞ it is a situation when a small change in price of the commodity leads to a infinite change in its demand thus a small rise in price would lead to zero demand for the commodity ex:airplane tickets, gas, concert tickets.
when does Ed=0 it is when a change in price of the commodity doesnt effect the demand of the product ex: gold water medcines
factors effecting price elasticity of demand 1 nature 2 availability 3.multiple use 4,postponement of use 5. income of buyer 6habitat 7.proportion of income spent 8. price level 9.time period
Created by: Angelo1234?
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