Elastic and inelastic demand, Microeconomics

Elastic and Inelastic Demand can be understood as follows:

Slope and elasticity of demand have an inverse relationship between them. When slope is high elasticity of demand becomes low and vice versa.

When the slope of the demand curve is infinity, elasticity becomes zero (perfectly inelastic demand); and when slope of the demand curve is zero, elasticity becomes infinite (perfectly elastic demand). Unit elasticity means that a 1% change in cost will result in an exact 1% change in quantity demanded. Hence elasticity will be equal to one. A unit elastic demand curve plots a rectangular hyperbola. Note that the straight line demand curve cannot have unit elasticity as the value of elasticity changes along with the straight line demand curve.

Total revenue and Elasticity can be described as follows:

The Total revenue (TR) = Price x Quantity; when the demand curve becomes inelastic, TR increases as the cost goes up, and vice versa; when the demand curve becomes elastic, TR falls as the price increases, and vice versa.

 

Posted Date: 7/19/2012 4:05:52 AM | Location : United States







Related Discussions:- Elastic and inelastic demand, Assignment Help, Ask Question on Elastic and inelastic demand, Get Answer, Expert's Help, Elastic and inelastic demand Discussions

Write discussion on Elastic and inelastic demand
Your posts are moderated
Related Questions
What is the difference between indifference curve and isoquants?  An indifference curve shows dissimilar combinations which a consumer can buy with a given level of income. Ind

User Cost of Capital = Economic Depreciation + (Interest Rate)(Value of Capital) - Example An Airline buys Boeing 737 for $150 million with the expected life of 30

TRADE AND ECONOMIC GROWTH : Foreign trade has worked as an 'engine of growth' in the past (witness Great Britain in the 19th century and Japan in the 20th, besides others), an

Structural Unemployment: This is unemployment resulting from changes in the pattern of demand for goods and services or changes in technology.These changes may in turn alter

Show the possible outcome of setting a minimum wage for under-eighteens. Explaining and illustration of minimum wage - clearly set above market equilibrium outlining res

1. Describe why government regulation is required, citing the major reasons for government involvement in a market economy. 2. Justify the rationale for the intervention of gove

Direction of Trade: It is indicative of the structure and level of economic development. As a country develops and its trade gets diversified, it has to seek new outlets for i

factors influencing the conditions of demand for a given product

Government Policy Business Cycle Business cycles create instability in the economy. The period of boom or rising business activities is characterised by increase in output, emp

Implications of Williams model of managerial discretion in Nepalese industries