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Elasticity of Demand, an economic concept, is normally included within the marketing part of the Business Studies syllabus. Elasticity of demand measures the proportional change in demand that has resulted from one of a number of factors, of which the most commonly examined are; a change in price of the good, change in incomes of consumers of the good or a change in advertising expenditure on the good. ...
The changes that we are therefore concerned with are;
Changes in price of the goods
Changes in peoples income
Changes in advertising on the goods.
There are three Main levels of elasticity (the perfect elastic or inelastic are just for theory very unusual), and each of these will apply to the three types of elasticity of demand outlined above.
The formulas for each type of elasticity of demand are shown below:
When we calculate the Elasticity of demand, then
If answer is less than 1, the good has inelastic demand ( of any type)
If answer is equal to 1, the good has unitary elasticity demand ( of any type)
If answer is greater than 1, the good has elastic demand ( of any type)
1.
Approximate Word count = 672
Approximate Pages = 2.7
(250 words per page double spaced)
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