Price elasticity of demand and supply, Microeconomics

 

Price Elasticity of Demand is explained below:

Price elasticity of demand/require is the percentage change in the quantity demanded with respect to the percentage change in the cost.

Price elasticity of demand can be illustrated by the below written formula:

 

P?d = Percentage change in Quantity Demanded

Percentage change in Price

 

Where ? = Epsilon; universal notation for elasticity.

If, for instance, a 20% rise in the price of a product causes a 10% fall in the Quantity demanded, the price elasticity of demand becomes:

 

P?d = - 10% = - 0.5

20%

 

Price Elasticity of Supply is defined below:

Price elasticity of supply is the percentage change in quantity supplied with respect to the percentage change in the cost of commodity.

Price elasticity of supply can be defined by the below written formula:

 

P?s = Percentage change in Quantity Supplied

Percentage change in Price

 

 

If a 15% increase in the price of a commodity causes a 15% rise in the quantity supplied, the price elasticity of supply will become:

 

P?s = 15 % = 1

    15 %

 

Posted Date: 7/19/2012 3:57:05 AM | Location : United States







Related Discussions:- Price elasticity of demand and supply, Assignment Help, Ask Question on Price elasticity of demand and supply, Get Answer, Expert's Help, Price elasticity of demand and supply Discussions

Write discussion on Price elasticity of demand and supply
Your posts are moderated
Related Questions
Problem : (a) Describe the law of demand and the factors affecting demand. (b) llustrate and  Explain how demand of a commodity will change if there is a tax on that product

Q=10-2P,PRICE DECREASE FROM RS 3 TO 2

1. Explain how the aggregate supply curve for the entire economy can be derived under; i. Classical assumption ii. Keynesian assumption 2. Explain how equilibrium can be a

CAUSES OF SLOW GROWTH: A recent empirical study seeks to explain statistically the variations in inter-country growth rates. The global pattern of growth is shown to depend on

how to find opportunity cost on PPc

Define Disposable Incomeand dumping Disposable Income :  The amount of income left after as deductions as income tax, pension contributions and national insurance. More genera

project on visit to village for agriculturebased project

DIMENSIONS OF UNEMPLOYMENT: What is the level of unemployment in the country? According to the 1999-2000 Survey of NSSO, the number of unemployed has increased from 20.13 mill

Problem 1 (a) Explain the evolution of exchange rate system in Mauritius. (b) According to you, what factors determine exchange rates in the long run? Problem 2 "Inf

What are expansionary and contractionary effects?  Expansionary effect refers to the effect of raising the equilibrium level of national income. For example, an increase in gov