Examples Of Elasticity Of Demand

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Recommended: The concept of price elasticity of demand

Elasticity is allows us to analyze supply and demand with greater precision. We use elasticity to measure of how much buyers and sellers respond to changes in market conditions. The factors changes such as price, income or the price of other goods.

First we will discuss about the Income Elasticity of Demand, (Yed). Elasticity of demand are used to measure the relationship between a change of quantity of demand for a particular goods and a change of consumer income. It is computed as the percentage change in quantity demanded divided by the percentage change in income. The formula we use to calculate income elasticity of demand as below:

Income Elasticity of Demand = % change in quantity demanded / % change in income.

Income of elasticity …show more content…

Perfect competition Is a market in which there are many buyers and sellers, the products are homogeneous and sellers can easily enter and exit from the market. Example restaurant business are counted as perfect competition because any people you can set up the restaurant easily if you have enough capital. The characteristic of perfect competition. They are free entry and exit into the market. For example, if you want to set up restaurant you can register with government and set up if you want to give up your shop you can just close it nobody will care about it. Next is perfect competition have a very large seller and buyer. Because of this the firm are the price taker. Because too many competitor so you have to follow the price other people sell then your customer will not run away to your competitor. In this market structure, everybody have the perfect knowledge about the market. All the seller and buyer know what happen to the market, how much this product sell in market and what new product have launch and other. Not only that, the firm can move their factory or office from A to …show more content…

In this price discrimination, the firm divided consumer into many submarket or subgroups. Every group that they divided out is the different market. They charge different price in this different market. The price charged on product depends on the price elasticity of demand. For example of third degree discrimination is in the cinema of the movie ticket. Cinema company charged the ticket in different price between adult and children. They charge more expensive to adult and cheap to children. Another example are transportation. Bus service charge the different price for adult and children. Some of the bus company also differentiate the worker and students. They give discount to student due to they don’t have income. Not only that, many of the Theme park they also charge the different price of the entry ticket between adult and

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