In this article we will discuss about the formula and equation for calculating the price elasticity of demand explained with the help of examples. According to the law of demand as the (own) price of a good decreases or increases, the quantity demanded of it would, respectively, increase or decrease. The capacity of demand for a good to increase or [...]
The following points highlight the eight main factors influencing price elasticity of demand. The factors are: 1. The Availability of Close Substitutes 2. Definition of the Commodity 3. Importance in Consumer’s Budget 4. Necessities Vs. Luxuries 5. Time 6. The Number of Uses 7. The Prices of Related Goods 8. Economic and Human Constraints. Factor # 1. The Availability of [...]
Marginal Revenue and Price Elasticity of Demand! The concept of marginal revenue is closely related to price elasticity of demand. The word 'margin' always refers to anything extra. Therefore, marginal revenue is obtained by selling an extra unit of a commodity (or service). But a more accurate definition of marginal revenue goes as follows: Marginal revenue is the rate of [...]