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the term real income effect applies to it at that point which define's as an individual cannot keep buying the same quantity of a product of its price rises while there income stays the same
What else can I help you with?
Total expenditures are determined by what?
Dividing the change in demand for the product by its change in price. e=(change in demand)%/(change in price)%
Why does elasticity of demand differ from other commodities?
Because it doest not relate to consumers its effects on change in price
What is determinants of price elasticity of demand?
The rate of change of price and the rate of change of demand as a function of price.
How do you calculate arc elasticity of a commodity?
You calculate the arc elasticity of a commodity by dividing the change in demand by the average price, and then dividing that answer by the change in price divided by the average demand. So you will have (change in demand/average price)/(change in price/average demand).
Which term refers to the extent to which a change in price causes a change in demand?
Demand-price elasticity.
Explain the effects of a rise in the price on market when the price elasticity of demand for product is inelastic?
Revenue of the producer will increase since there will be no change in quantity demanded.
Why does trading stock create volatility?
Simple answer is that volatility is simply price change. Price changes due to supply and demand so when people trade a stock it affects supply and demand.
What is the Four determinants of price elasticity of demand?
perfectly elastic demand the quantity change by infinitely large amount proportion due to the small change in price, is called perfectly elastic demand. perfectly inelastic demand the quantity demand doesn't change at all due to the change in price is called perfectly inelastic demand. relatively elastic demand the quantity demand changes by a little more percentage than the change in price is called relatively elastic demand. relatively inelastic demand the percentage change in quantity demand is less than the percentage change change in its price is called relatively inelastic demand unitary elastic demand the percentage change in quantity demand is equal to the percentage change in price is called unitary elastic demand
What is the difference between income elasticity demand and price elasticity demand?
price elasticity is the degree to which demand for a good will change relative to a change in the price of that good. Income elasticity is the degree to which demand for a good will change relative to a change in the spending power of the consumer. it is the percentage change in quantity demanded/percentage change in price.
When a price of a good increased by 2 percent the quantity demanded decreased by 10 percent What is the price elasticity of demand?
Price elasticity of demand= percentage change in demand/percentage cgange in price 2 = % chnge in demand/10 % change in demand= 2*10 % change in demand= 20%
What questions is the price elasticity of demand designed to answer?
Price elasticity of demand is used to determine how changes in price will effect total revenue. If demand is elastic(>1) a change in price will result in the opposite change in total revenue.(+P=-TR) When demand is unit elastic(=1) a change in price wont change total revenue. If demand is inelastic a change in price will result in a change in total revenue in the same direction.(+P=+TR)
Distinguish between price elasticity and income elasticity?
The price elasticity refers to the change in demand due to the change in price. The income elasticity of demand on the other hand refers to the change in demand due to the change in income.
