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Unit 3: Elasticity - Coggle Diagram
Unit 3: Elasticity
cross elasticity of demand
range
independent goods Ed=0
positive for substitute goods
negative for complement goods
application
company change price
government allow merger
measures responsiveness purchases
income elasticity of demand
normal goods positive elasticity
inferior good negative elasticity
measures responsiveness of buyers
insights
high income
low or negative income
elasticity and pricing power
college tuitions
business air travellers
children discounts
Price elastic demand
Price elastic demand and total revenue relationship
Unit elastic
Price inelastic
Price elastic
Ranges
Ed<1
Ed=0
Ed=1
Ed>1
Ed=infinite
Determinants
Number of close substitutes
Good vs Necessity
Nature of the good
Proportion of income spent on good
Time period involved
Application of Price elasticity demand
Firms
proportion of indirect tax passed to consumers
Helps to employ price discrimination
prediction of change
Comparison purpose
Government
determine incidence of indirect tax
predict currency devaluation
estimate size of necessary tax
Price elasticity of supply
Determinants
luxuries vs necessities
time
short run
long run
immediate market period
proportion of income
substitutability
ranges
Es>1
Es=1
Es<1
Es=0
application
reproductions
volatile gold prices
antiques