{"id":5396,"date":"2019-02-14T09:45:30","date_gmt":"2019-02-14T04:15:30","guid":{"rendered":"http:\/\/astan.lk\/al_virtualclassroom\/?p=5396"},"modified":"2019-02-16T10:01:22","modified_gmt":"2019-02-16T04:31:22","slug":"price-elasticity-of-demand","status":"publish","type":"post","link":"https:\/\/astan.lk\/al_virtualclassroom\/price-elasticity-of-demand\/","title":{"rendered":"Price elasticity of demand"},"content":{"rendered":"<p><strong>Elasticity is responsiveness of change in dependent variable relative to independent variable<\/strong><\/p>\n<ul>\n<li>Price elasticity of demand is the responsiveness to change in quantity demanded<br \/>\nrelative to change in price<\/li>\n<\/ul>\n<h3>\n<span style=\"color: #000000;\"><strong>Price elasticity can be calculated as follows<\/strong><\/span><\/h3>\n<p>Price elasticity \u00a0= Precentage change in quantity demand \/ Precentage change in price (\u0394QD% \/\u0394P%)<\/p>\n<ul>\n<li>Elasticity can be calculated under point elasticity formula and arc elasticity formula<\/li>\n<li>Point elasticity formula estimates the elasticity of given point considering small change in price and quantity<\/li>\n<li>In point elasticity formula, percentage change of price and quantity are calculated relative to initial price and quantity<\/li>\n<li>Even though the slope is constant, quantity and price change from point to point. Elasticity of a linear demand curve that slopes from left to right changes from point to point. Elasticity varies from zero to infinity<\/li>\n<\/ul>\n<h3>\n<span style=\"color: #000000;\"><strong>Following are three specific situations that have a constant elasticity coefficients throughout the demand curve,<\/strong><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000000;\">Perfect elastic demand<\/span><\/li>\n<li><span style=\"color: #000000;\">Perfect inelastic demand<\/span><\/li>\n<li><span style=\"color: #000000;\">Unitary elastic demand<\/span><\/li>\n<li><span style=\"color: #000000;\">Arc elasticity formula can be used to calculate the elasticity of a range<\/span><\/li>\n<li><span style=\"color: #000000;\">Arc elasticity formula considers a big change in price and quantity<\/span><\/li>\n<li><span style=\"color: #000000;\">In point elasticity formula, percentage change of price and quantity are calculated relative to mean or average value previously and now.<\/span><\/li>\n<\/ul>\n<h3>\n<span style=\"color: #000000;\"><strong>Types of elasticity which derived according to the elasticity formula can be shown below<\/strong><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000000;\">Zero(0)- Perfect inelastic<\/span><\/li>\n<li><span style=\"color: #000000;\">Less than one(&lt;1)-inelastic<\/span><\/li>\n<li><span style=\"color: #000000;\">Equal to one (1)-unitary<\/span><\/li>\n<li><span style=\"color: #000000;\">More than one(&gt;1)-elastic<\/span><\/li>\n<li><span style=\"color: #000000;\">Infinity perfect elastic<\/span><\/li>\n<li><span style=\"color: #000000;\">There is a relationship between price elasticity and consumer outlay\/ producer revenue<\/span><\/li>\n<li><span style=\"color: #000000;\">Since demand function contains the inverse of the slope, elasticity also can be calculated through it.<\/span><\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\"><strong>The consumer outlay can be calculated through multiplying the quantity demanded by the price.<\/strong><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000000;\">The producer revenue can be calculated through multiplying the quantity sold by the price.<\/span><\/li>\n<li><span style=\"color: #000000;\">Due to quantity sold being equal to the quantity purchased, production revenue is equal to consumer outlay.<\/span><\/li>\n<\/ul>\n<h3><span style=\"color: #000000;\"><strong>When the price is changed, the consumer outlay is changed according to the type of\u00a0<\/strong><strong>price elasticity.<\/strong><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000000;\">There is a positive relationship between change in price of a inelastic good and<\/span><br \/>\n<span style=\"color: #000000;\"> change in consumer outlay<\/span><\/li>\n<li><span style=\"color: #000000;\">When the price increases, the consumer outlay increases.<\/span><\/li>\n<li><span style=\"color: #000000;\">When the price decreases, the consumer outlay decreases.<\/span><\/li>\n<li><span style=\"color: #000000;\">If the demand of a commodity is unitary, the consumer outlay could not be changed<\/span><br \/>\n<span style=\"color: #000000;\"> when the price of the commodity is changed.<\/span><\/li>\n<li><span style=\"color: #000000;\">It would be an inverse relationship between the change in price of a good and<\/span><br \/>\n<span style=\"color: #000000;\"> change in consumer outlay , if the demand for a commodity is elastic.<\/span><\/li>\n<li><span style=\"color: #000000;\">When the price increases the consumer outlay decreases.<\/span><\/li>\n<li><span style=\"color: #000000;\">When price decreases the consumer outlay is increases.<\/span><\/li>\n<li><span style=\"color: #000000;\">Various reasons affect to determine price elasticity of demand.<\/span><\/li>\n<\/ul>\n<h3>\n<span style=\"color: #000000;\"><strong>The reasons that affect change of price elasticity of demand is defined as\u00a0<\/strong><strong>determinants of price elasticity and these are mentioned below.<\/strong><\/span><\/h3>\n<ul>\n<li><span style=\"color: #000000;\">Availability of substitutes for a good<\/span><\/li>\n<li><span style=\"color: #000000;\">Income which is spent on the good<\/span><\/li>\n<li><span style=\"color: #000000;\">Definition of the good<\/span><\/li>\n<li><span style=\"color: #000000;\">Benefits of the good<\/span><\/li>\n<li><span style=\"color: #000000;\">Luxuries and Necessities<\/span><\/li>\n<li><span style=\"color: #000000;\">Time period needed to adjust the price changes.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Elasticity is responsiveness of change in dependent variable relative to independent variable Price elasticity of demand is the responsiveness to change in quantity demanded relative to change in price Price elasticity can be calculated as follows Price elasticity \u00a0= Precentage change in quantity demand \/ Precentage change in price (\u0394QD% \/\u0394P%) Elasticity can be calculated [&hellip;]<\/p>\n","protected":false},"author":842,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[54,2681],"tags":[],"class_list":["post-5396","post","type-post","status-publish","format-standard","hentry","category-economics","category-unit-2-en"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Price elasticity of demand - Learning &amp; Education Portal<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/astan.lk\/al_virtualclassroom\/price-elasticity-of-demand\/\" \/>\n<meta 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