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Write a 4 pages paper on elasticity of demand: measurement and classification. Elastic demand represents a more than proportionate change in demand for a small change in price.Inelastic demand represe
Write a 4 pages paper on elasticity of demand: measurement and classification. Elastic demand represents a more than proportionate change in demand for a small change in price.
Inelastic demand represents a small change in quantity demanded a big change in price.
Income elasticity of demand indicates the responsiveness of the quantity demanded to the change in the income of the consumer. The income of the consumer plays a very dominating role in determining the demand for a product.
Cross elasticity of demand is the responsiveness of the quantity demanded of the commodity X to the change in the price of the commodity Y. The commodity Y may be a substitute or a complementary good for commodity X. For example, tea and coffee are substitutes and pen and ink are complimentary good. A reduction in the price of tea will lead to the reduction in the demand for coffee and increase in the demand for tea, as the people would reduce the consumption of coffee because tea is available at a cheaper rate.
MEASUREMENT OF ELASTICITY OF DEMAND
The elasticity of demand can be measured through the following 4 methods
1. Percentage method.
2. Point elastic method.
3. Total outlay method.
4. Arc elasticity method.
