Government fixes the minimum prices of farm products because the demand for farm products is inelastic. Research shows that increases in the price of tobacco products induces a considerable reduction in smokers, or quantity consumption. Products whose purchasing schedule behaves like this are called products with relatively elastic demand.
Therefore, in the interest of general public, the government owns and runs such services.
Importance of the Concept of Price Elasticity: His erly efforts t selling the recordings nd downlodble book files online hve been disppointing, showing n pprent lck of price elsticity in the mrket.
Taking income on the vertical axis and the quantity demanded on the horizontal axis, Price elasticity products essays increase in demand Q1 0Q2 is more than the rise in income Y1 Y2, as shown in Figure 13 Panel A.
Types of cancer that alcohol might have the most impact on are oral and pharyngeal. It is counterintuitive to consider dropping prices to drive up revenues, which is what the majority of ebook sellers do in an attempt to gain greater market share Xu, The demand curve for good B jam will coincide with the X-axis.
As the demand is less elastic, demand is not reduced much. Products which are deemed as necessities will have relatively inelastic demand schedules. But the demand for prestige goods, like jewels, rare coins, rare stamps, paintings by Tagore or Picasso, etc.
If the two points which form the arc on the demand curve are so close that they almost merge into each other, the numerical value of arc elasticity equals the numerical value of point elasticity. The cross elasticity is high.
In the words of J. If the demand for labour in an industry is elastic, strikes and other trade union tactics will not be of any avail in raising wages. Such commodities are shoe polish, pen, pencil, thread, needle, etc. Price reduction can be envisaged in response to competition while avoiding a price war.
For example, coal is used for cooking and heating, for power generation, in factories, in locomotives, etc. The time horizon is also an important factor for elasticity.
It can also be measured with the formula of arc elasticity with the difference that here price and quantity refer to different goods.
In the Determination of Prices of Public Utilities: On the other hand if the demand is elastic than the burden of tax will be more on the producer. He should consider whether a lowering of price will stimulate demand for his product, and if so to what extent and whether his profits will also increase a result thereof.
They are necessities, e. This paradox is easily explained by the inelastic nature of demand for most farm products. For example, if the price of coffee rises, the demand for coffee will decrease and that for tea will increase, and vice versa.
During this phase, the main goal is to sustain the market share and extend the product life cycle. Shifting of tax burden: The formula for PEoD is:Essays; Price Elasticity of Demand: Analysis; Price Elasticity of Demand: Analysis.
5 May Tobacco; Cigarette smoking is widely recognized as the number 1 cause of cancer in the United States.
One method the government can use to reduce cigarette smoking is to tax cigarettes. This shows that the demand for tobacco products is elastic. Assignment 2 Price Elasticity Of Demand Price Elasticity of Demand is the quantitative measure of consumer behavior whereby there is indication of response of quantity demanded for a product or service to change in price of the good or service (Mankiw,).
There are mainly two types of elasticity, the elasticity of demand which includes price elasticity of demand, income elasticity of demand, and cross elasticity of demand as well as elasticity of supply (McConnell, Brue, & Flynn, )ii.
Price elasticity of demand In economics and business studies, the price elasticity of demand (PED) is an elasticity that measures the nature and degree of the relationship between changes in quantity demanded of a good and changes in its price.
In using the price elasticity of demand which can determine the performance of Alienware computers, in such case Alienware continues to design the highest performance PCs using bleeding-edge technologies and innovative industrial design.
We will write a custom essay sample on Price Elasticity specifically for you for only $ $/page. Order now If the seller is unable to raise prices because the product is price elastic (if prices rose, more demand would be lost than extra revenue gained), the seller then has to bear the burden of the tax or face decreased revenues.Download