The price, demand, elasticity - all these concepts fall within one enormous public scope - the market. Historically it developed so that it is the most important economic substitute. In other words, the market is an arena, and people in it - players.
Instruction
1. In economy mean a measure of reaction of one size to change by elasticity another. Therefore, elasticity of demand at the price call the reaction of demand caused by the change in price. In other words, the price elasticity of demand shows on how many demand size in percentage the relation on any given goods changed at change of its price for 1%.
2. Demand is elastic if at the change in price of goods or service for 1% the size of demand changes more than for 1%. Respectively, if less than for 1%, then demand is not elastic.
3. As well as in any rule, there are special cases here. Demand can have single elasticity. In this case at advance in price for 1% demand goes down for 1%. Therefore, it is possible to draw a conclusion that at single elasticity the change in price for any goods or service will be followed by proportional change of demand for these goods or service.
4. Also there is absolutely elastic and absolutely inelastic demand. The first case characterizes that at any established price on a certain range of demand the consumers are ready to buy any quantity of goods. Respectively absolutely inelastic demand shows that the volume of demand for products at any price remains invariable.
5. In special group mark out cross elasticity of demand. It shows how the size of demand for these goods or service at the change in price of other goods or service will change.
6. To find elasticity of demand, it is necessary to count percentage change of size of demand and to correlate it to the percentage change in price. E=(Q2-Q1)/(P2-P1)*P/Q (E – coefficient of price elasticity of demand, Q2-Q1 – gain of size of demand, P2-P1 – gain of the price, P – the price, Q – production volume. This formula shows that the coefficient of elasticity depends not only on a ratio of gains of the price and size of products, but also on the actual value of the price and volume.
7. The coefficient of cross elasticity is differently. E=(Q2-Q1)/Q*P / (P2-P1). This coefficient can be more, it is less or is equal to zero. If it is more, then we deal with interchangeable goods (substitutes) if it is less - the supplementing goods (complements) if it is equal - goods are among themselves neutral.