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Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand?
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Distinguished between price elasticity of demand and cross elasticity ...
Price elasticity of demand is the demand of a particular product in response to the change in the actual price, means how much change in the price affects the demand for goods and services while other factors are constant. for calculating the price elasticity of demand we should divide the change in the quantity that is demanded by the change in the price. There is two type of elasticities, one is elastic and second is inelastic.
- Elastic Demand: Elastic demand is when the consumer responds more to the price being changed of a particular good.
- Inelastic Demand: Inelastic Demand is when there is little or no change in the demand for a product when there is a change in the price.
Price Elasticity of Demand = Percentage change in the quantity demanded/ percentage change in the price.
Cross elasticity of demand is responsible for measuring the actual change in the demand for one product because of the price change of another product. Means if a particular product has a substitute and it's price increases so the demand of the substitute will increase.
Cross elasticity of Demand = Percentage change in the quantity that is demanded of commodity A/ Percentage change in the price of commodity B.
Attached is the graphical representation of price elasticity of demand as well as cross elasticity of demand.
Price elasticity of demand is useful in the decision making of the firms because it affects the demand for the products which in return affects the revenue of the firm. If the demand is elastic and the firm changes a price of a product then there will be a huge change in the demand which in return will result in the loss and there will be less revenue generation. So decisions are made considering the elasticity or inelasticity of a product, that if the price changes how much demand will be affected and how much difference will it make to the revenue of the company.
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Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand?
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Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand?.
Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Distinguished between price elasticity of demand and cross elasticity of demand.explain with examples the importance of the concept of elasticity of demand?.
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