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demand elasticity - Coggle Diagram
demand elasticity
when is demand for a good or service price elastic or price inelastic (SPLAT)
Luxuries/necessity - luxuries tend to have more price elastic demand, and necessities tend to have an inelastic demand
Addictive/habit forming - if its addictive the price goes up and quantity will fall(but not by very much) and with addictive and habit forming it tends to be inelastic as people will buy it no matter what
Percentage of income - the greater the percentage of income that a price change takes the more price elastic demand is going to be as comparing a 10% price increase in an apple compared to a car, the cars demand is going to be more elastic
Time period - consumers may not have much time to look for alternatives or lack there of (price would usually be inelastic) but in the long run demand is more price elastic as there tends to be more alternatives
Substitutes, as the more there are the more price elastic demand is going to be and less substitutes there are the more price inelastic demand is going to be
Price Elasticity of Demand (PED)
Measures the responsiveness of quantity demanded given in a change in price
PED = the percentage change in quantity demanded / the percentage change in price ( Q before you P)
if we need to change numbers to a percentage change its - the difference between the two numbers divided by the original number and times by a hundred(difference over original x 100)
if the number you get is negative/minus write it but then forget about it as it is not important and use the number and use this
0 demand is perfectly price inelastic 9 where the line on the graph is completely vertical)
∞ demand is perfectly price elastic ( when the line is completely horizontal)
<1 demand is price inelastic ( shallower curve on graph)
1 demand is unit price elastic ( when the graph has a curve )
(>1 demand is price elastic
other demand elasticity's
income elasticity of demand
% change in quantity demanded / %change in income
cross elasticity of demand
%change in demand for good A / % change in demand for good B
the degree to which demand for a good responds to changes in household income depends on the nature of the good
substitute = positive and complementary = negative
the smaller the number the less amount of substitute
https://youtu.be/nOlOf_KEnrw