MB0042 MANAGERIAL ECONOMICS
Ques1.Explain what is terms elasticity of take away and out seam the determinants of impairment elasticity of ask with examples.
Ans 1. impairment Elasticity of Demand
In the words of Prof. Stonier and Hague, equipment casualty elasticity of claim is a technical term used by economists to pardon the degree of responsiveness of the demand for a product to a modify in its price.
Ep = [pic]
Demand rises by 80% i.e. + 80 = 4Demand falls by 80%, i.e. 80 = 4
Prices falls by 20%, i.e. 20Price rises by 20%, i.e. +20
It implies that at the present level with every diverseness in price, there will be a switch over in demand four times inversely. Generally the co-efficient of price elasticity of demand always holds a negative shorten because there is an inverse relation between the price and mensuration demanded.
Symbolically Ep = [pic]
Original demand = 20 units original price = Rs.6
New demand = 60 units New price = 4
alternate in demand = 60 20 = 40
Change in price 4 6 = -2
The rate of potpourri in demand may not always be symmetrical to the change in price. A small change in price may lead to very great change in demand or a big change in price may not lead to a great change in demand.
Based on numeral values of the co-efficient of elasticity, we can have the following five degrees of price elasticity of demand.
Different Degree of Price Elasticity of Demand
1. absolutely Elastic Demand
In this case, a very small change in price leads to an infinite change in demand. The demand curve is a horizontal line and parallel to OX axis. The numerical co-efficient of utterly elastic demand is infinity (ED = [pic])
2. suddenly Inelastic Demand: In this case, what ever may be the change in price, quantity demanded will remain perfectly constant. The demand curve is a vertical straight line and parallel to OY axis. Quantity demanded would be 10 units, irrespective of price changes from Rs.10.00 to Rs.2.00. Hence, the...If you want to get a full essay, order it on our website: Orderessay
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