Price
elasticity is defined as a measurement of the responsiveness of people to
changes in the economic variables. Referring to the article, the price of oil
has been increasing rapidly but the fact is we are not even running out of oil.
In relate to the economic concept, there is a large percentage change in the
quantity demanded for given percentage change in price for the oil. Therefore,
most of the governments around the world consider or categorize oil as an
elastic demand. In other words, the demand for oil will still be constant or
increased even tho the price itself rise as high as the firm sets it up. The
reduction of fuel usage can happen due to most people with cars or machinery
are jobless and they have insufficient funds to buy oil or fuel. This is not
beneficial to every government as this can be harmful to the countries
economics. A decrease in demand due to
high price levels is also known as demand destruction. The graph below
represents the elastic demand toward oil nowadays.
Based on the diagram above, the change in the price of
oil is more than the proportionate change in the quantity demanded. Therefore,
Ed > 1.
Entry by: Ika Adnan
Besides elastic demand, how many types of demand are still existing in the market... ?
ReplyDeleteHello YokCheah, there is only 2 in the existing market. Those 2 are, elastic and incelastic demand :)
ReplyDeleteHow marketers adjust their strategy based on the sensitivity of the particular products and services.. ?
ReplyDeleteIf the percentage change in demand of a particular product is greater than the percentage change in price, the product is considered as an elastic demand product. Between the relationship of total revenue and price are in opposite direction. Therefore marketer would cut down the price and earn higher revenue.
ReplyDeleteIf the product is an inelastic demand product. The relationship between the total revenue and price are in the same direction. Hence, marketer would higher the price to gain higher revenue.
Elasticity is a kind of measurement to measure?
ReplyDeleteWhat are the determinants of Elasticity for a particular product in the market?
Elasticity is a measure of the responsiveness of people to changes in economic variables.
ReplyDeleteThe determinants of elasticity of demand are: Luxuries Vs Necessities, availability of substitutes, percentage of income spent, price of the product itself, level of income, habit and time period.