Friday, July 27, 2018

Elasticity and it's Nature


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