Elasticity

Memo To: TBD From: Junior Staff Analyst Date: October 12, 2011 pendant: Elasticity outline for Mr. CEO Elasticity is a step of how responsive consumers atomic number 18 to legal suffering varietys. Price alters can trigger increase or decrease in demand for a carrefour depending on how plastic the demand is for a point of intersection. Elasticity of demand is defined one-third ways: 1. Elastic occupy - a share variety show in impairment results in a larger, inverse dowery change in demand. For example, if the expense of a product increases by 10%, the demand for the product decreases by to a greater extent than than 10%, and vice versa. change magnitude price lowers come revenue portion of music decreasing price raises total revenue. 2. Inelastic Demand - a percent change in price results in an inverse, littler percent change in demand (usually applies to goods considered necessities). Increasing price increases re venue while decreasing price lowers total revenue. 3. unitary Demand a percent change in price yields an equal but inverse percent change in demand. If elasticity is unitary, a change in price does non change total revenue. Several factors contribute to a products demand elasticity: 1.

Availability of Substitutes Elasticity go away be greater when there are more akin or similar interfere goods available for example, there is much little difference among competing brands. If no identical or substitute goods are available, the demand leave alone be dead. Examples of inelastic goods are salt, gasoline and coffee. 2. Level of Neces! sity (or Luxury) the more infallible a good, the more inelastic (for example, flour) whereas an elastic good will loosely be considered luxurious in nature. 3. Time the more length of service a price change, the greater a goods elasticity since consumers will have more time to hunt for alternatives or substitutes. 4. Proportion of Income or work out the higher the percent of budget or income that a pointedness consumes, the greater its elasticity....If you take to get a full essay, modulate it on our website: BestEssayCheap.com

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