What factors influence the price elasticity of demand for a good?
Price elasticity of demand is defined as the measurement of how responsive to changes in price the quantity demanded of a good is. The consumption of goods with relatively elastic demand is fairly responsive to changes in price, and the consumption of goods with relatively inelastic demand is not very responsive to changes in price
-- Nature of Goods: The economics goods are classified into three categories, i.e. luxuries, comforts and necessities. Elasticity of demand is highly elastic for luxury goods; is inelastic demand for necessities; and is more elastic for comforts
-- Availability of Substitutes: When in the market a good has more close substitutes the elasticity for that good will be high; and vice-a-versa
-- Number of Uses of a Good: The single-use goods is less elastic as compared to multi-use goods.
-- Distribution of Income: The consumers in the bracket of lower or middle income would be highly sensitive to change in the price compared to high income people whose demand would be inelastic
-- Complementary goods: Elasticity of demand is relatively inelastic for the complementary goods
-- Price of the good: When the price of good is very small, a slight price change would have no considerable impact on demand
-- Role of Habits: In the consumption of articles of addiction such as alcohol, drugs and tobacco products an increase in price would not reduce the demand and the elasticity of demand will be relatively small
(10 points) What is cross-wage elasticity of labor demand? What influence cross-wage elasticity of labor demand? Explain each fully. factors 6.
16. If price elasticity of demand for good X is 2 and the price elasticity of supply for good X is 3; if an excise tax of $40 levied on good x, consumers will end up paying _______ and producers paying __________. $15; $25 $16; $24 $25; $15 $24; $16
If a good is inferior, its Multiple Choice Cross-price elasticity is negative. Price elasticity of demand is negative. Income elasticity of demand is positive. Income elasticity of demand is negative.
Exercise 4.1: Price Elasticity of Demand The price of a good is $200, and the quantity demanded is 2,000. The price elasticity of demand is-1.25. If the price changes to $204, what is the new quantity demanded? Exercise 4.2: Income Elasticity of Demand A consumer's income is $40,000, and the quantity demanded of a good is 2,000. The income elasticity of demand is +0.60. If the consumer's income changes to $41,000, what is the new quantity demanded? Exercise 4.3: Income...
The industry price elasticity of demand for good X is −1.5. The price elasticity of demand for the output of an individual firm producing good X in this industry −9. From this we can conclude that: individual firms have significant market power. the HHI for this industry is 1,667. this industry is highly concentrated. None of the options. individual firms have little market power.
Draw the demand curve for a good with a price elasticity of demand equal to 0. What can you say about substitutes available to the consumer for this good?
Analysis of price demand elasticity of I-phone products and the determinant factors of elasticity
Suppose the own price elasticity of demand for good X is -2, its income elasticity is 3, its advertising elasticity is 4, and the cross-price elasticity of demand between it and good Y is -6. Determine how much the consumption of this good will change if for the following: A) The price of good X decreases by 5 percent. B) The price of good Y increases by 10 percent. C) Advertising decreases by 2 percent. D) Income increases by 3...
Suppose that the price elasticity of demand of a good is -3. Its demand is _________ and the percentage change in its quantity demanded is ________ than the percentage change in its price. A. Elastic: Smaller B. Elastic: Greater C. Inelastic: Smaller D. Inelastic: Greater Which of the following is not a determinant of the price elasticity of demand? A. Availability of substitutes B. Degree of necessity C. Cost relative to income D. Availability of inputs With a(n) ______ demand,...
Price Elasticity of Demand: Naturally Good Organics Price Elasticity of Demand measurers how changed in a price affect the quantity of the product demanded. Specifically, it is the ratio of the percentage change in quantity demanded to the percentage change in price. In order to understand how to plan a successful pricing program, marketers must understand how elastic or inelastic the consumers are to changes in price. In other words, to what extent will a price increase or decrease result...