(Adams; Periton, 2006) the elasticity of demand therefore measures the responsiveness of the demand to the changes in the factors that may affect demand. Therefore, this means that the elasticities of demand can be estimated for price, income, prices of related products or services, and the advertising expenditure needed. (Png; Cheng, 2001) as far as the factors affecting elasticity of supply are concerned, one must note that the longer the time one takes over the supply of a product or a service, the more elastic the supply becomes. Supply is stated to be elastic if it is found that it is easier to transfer resources in production from other goods to the good in question. Take for example a company that manufactures dinner plates. In all probability, this particular company would also manufacture coffee mugs, and it would be a simple matter for the company to produce more coffee mugs, and lesser dinner plates. Would it be as easy for a company that neither produces dinner plates nor produces coffee mugs to enter the market? In all probability, the answer would be 'no' because of entry barriers. ("Factors affecting elasticity of supply," n. d.) The value of the price elasticity of supply is stated to be positive, because of the fact that an increase in price would most likely also increase the quantity that is supplied to the market. This would thereafter depend upon these factors: does the company possess spare capacity, and if so, how much? If there is plenty of spare capacity, then this would mean that the firm, either a private enterprise or a government holding, would be able to increase its output without causing a rise in costs, thereby making sure that supply remains elastic. Similarly, if the stock position is high,...
This means that if capital and labor resources are also elastic, then the elasticity of supply for a product would also be higher than if these factors could not be changes quickly. ("Price elasticity of supply," n. d.) Thus it could be said that in this way, it is obvious that elasticity is important to firms and to governments.
Elasticity is a concept in microeconomics that reflects "the degree to which a demand or supply curve varies among products" (Investopedia, 2013). Thus, the degree to which demand or supply of a good changes with a change in the price. This dynamic can be calculated using the following formula: Elasticity = (% change in quantity / % change in price) In general, a good is characterized as elastic if the change in
Elasticity of Demand Discuss elasticity of demand as it pertains to elastic, unit, and inelastic demand Price elasticity of demand is the measure of the change in the demand of a given product as a response to a change of its price. When demand is inelastic (a value versatility less than 1), a value increase raises downright income, and a value reduction lessens absolute income. The point when interest is elastic (a
Economics In order to understand the ways that different changes in the external environment will affect the demand for milk, some assumptions need to be made with respect to the milk market. We know that demand for milk will increase as wealth increases, which is the result of milk being something of a luxury item (Arnold, 2007). This means that there is some degree of correlation between wealth and milk consumption,
Economic Analysis of Australian Fruit and Vegetable Market Severe flooding in Queensland in late 2010 and early 2011 "affected an area the size of France and Germany combined" (IBISWorld.com. January 2011. PP. 1), and contributed to massive spikes in fruit and vegetable prices across Australia on the order of 20 to 30% (The Sydney Morning Herald.com. January 11, 2011. PP. 1). Specific examples of these increases include: "broccoli jumping to $10
Economics of Alcohol Abuse Econcs Of Drugs & Alcohol How an Economist Might Approach Alcohol Abuse One answer would be to raise price by decree. Holding all other factors the same, this artificial price increase would initially reduce quantity consumed, but there would still be demand that went unfulfilled, which implies foregone profit at the new lower quantity and higher shelf price. Were supply restricted, say through a fixed number of licenses, this
Economics Total revenue represents all the company income. Total revenue is calculated by multiplying the price of products with the quantity sold. Typically, total revenue is calculated as follows: Total revenue = price x quantity Where price (P) and quantity (Q). Total revenue=PxQ As being revealed in Table 1, total revenue is calculated by multiplying price with quantity, when firm produces 2 quantities of goods, firm's total revenue is $10, however, when a firm produces
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