Please enable JavaScript.
Coggle requires JavaScript to display documents.
Elasticity Of Demand 2 - Coggle Diagram
Elasticity Of Demand 2
Elasticity
Response of variable to a change in another
Helps understand markets respond to change in demand supply
Price elasticity of demand
Responsiveness of demand to change in price
Responsiveness of demand for individual firm in competitive market
Responsiveness of market demand
Elasticity of demand
Value
Inelastic E < 1
Elasticity E = 1
Elastic E > 1
Measurement %Qd/%P
Determinants price elasticity of demand
Proportion income spend on goods
Time period
Number and closeness of substitute goods
Closeness one brand to another
Closeness one product to another
Total revenue
TR same as total consumer expenditure
TR = TE = P x Q
Minimum prices (price floor)
Effects: Prices don't go below certain level
Dealing with resulting surplus (goverment may purchase without procuring)
Justification: protecting intrests suppliers
Government intervention
Minimum and maximum prices
Indirect taxes cetain products
Government interfenes operations free market
Offering subsidies
Maximum prices (price ceiling)
Increase in demand
Dealing with result: Government may offer subsidies
Justification: Protecting intrests buyers