Elasticity
Elasticity is to
measure, how much the quantity is demanded for a good with respect to its
price, income and supply. It can also be known as the measure of responsiveness
of quantity demanded or quantity supplied to change in its determinants.
Elasticity determines the fundamental relationship between price and demand for
a good/service.
If for a product
quantity demanded changes a lot when price is changed a little is called as Elastic. If the price changed a lot and
demand does not change much is called Inelastic.
Examples
If the price of the
petrol increases the demand still is the same because for people driving and
going to their respective places is important. There are substitutes like train
and walking but the usage can’t be regular. It is Inelastic in nature.
Consider two vendors
are selling a bag of chips. If one seller has high price and the other has low
price. People buy the product at low price vendor. So, it is Elastic in demand.
No comments:
Post a Comment