The following are the main factors which determine the price elasticity of demand for a commodity: 1. The Availability of Substitutes 2. The Proportion of Consumer's Income Spent 3. The Number of Uses of a Commodity 4. Complementarity between Goods 5. Time and Elasticity. Determinant # 1. The Availability of Substitutes: Of all the factors determining price elasticity of demand [...]
The following points highlight the nine main practical applications of the concept of price elasticity of demand. The uses are: 1. Effects of changes in price upon demand 2. Effects of changes in price on revenue 3. Monopoly pricing 4. Price discrimination 5. Wage bargaining by trade unions 6. Importance in taxation 7. Importance in determining the incidence of taxation [...]
In this article we will discuss about the price elasticity of demand, explained with the help of suitable diagrams. In 1890, Alfred Marshall, the great neo-classical economist, developed a special measure for the response of one variable, such as quantity demanded, to change in another variable, such as price. It is called elasticity which is a measure of market sensitivity [...]