Elasticity in Economics: Price, Income, and Cross-Price Elasticity of Demand

elasticity

allows the muscle to return to its original shape after it has contracted or stretched

Elasticity is the measure of how responsive a variable is to changes in another variable. Specifically, price elasticity of demand (PED) measures the responsiveness of the quantity demanded of a product to changes in its price. If the PED is greater than 1, the demand for the product is considered elastic, meaning that consumers are highly responsive to changes in the product’s price. In contrast, if the PED is less than 1, demand is considered inelastic, meaning that consumers are relatively unresponsive to changes in the product’s price.

Elasticity is an important concept in economics because it helps us understand how changes in price and other factors can affect market outcomes. For example, if the PED for a particular product is highly elastic, a small increase in price could lead to a large decrease in demand, which could be detrimental to the seller’s revenue. On the other hand, if demand is relatively inelastic, the seller may be able to increase the price without losing many customers.

Other types of elasticity include income elasticity of demand (YED), which measures the responsiveness of demand for a product to changes in consumer income, and cross-price elasticity of demand (CPED), which measures the responsiveness of demand for one good to changes in the price of another good.

More Answers:

Order of Blood Flow Through the Heart: A Comprehensive Guide
Unlocking the Power of Extensibility: Enabling Continuous Evolution of Software Systems
Excitability: The Role of Voltage-Gated Ion Channels in Generating Electrical Signals in Living Cells and Tissues

Error 403 The request cannot be completed because you have exceeded your quota. : quotaExceeded

Share:

Recent Posts

Mathematics in Cancer Treatment

How Mathematics is Transforming Cancer Treatment Mathematics plays an increasingly vital role in the fight against cancer mesothelioma. From optimizing drug delivery systems to personalizing

Read More »