Elasticity

Memo To: TBD From: Junior Staff Analyst Date: October 12, 2011 written report: Elasticity outline for Mr. CEO Elasticity is a pace of how responsive consumers atomic number 18 to legal deformity varietys. Price modifys can trigger increase or decrease in demand for a carrefour depending on how manipulable the demand is for a mathematical product. Elasticity of demand is defined leash ways: 1. Elastic conduct - a share transmute in impairment results in a larger, inverse parcel change in demand. For example, if the legal injury of a product increases by 10%, the demand for the product decreases by to a greater extent than 10%, and vice versa. increase price lowers derive revenue put of music decreasing price raises total revenue. 2. Inelastic Demand - a percent change in price results in an inverse, littler percent change in demand (usually applies to goods considered necessities). Increasing price increases revenue w hile decreasing price lowers total revenue. 3. unitary Demand a percent change in price yields an equal but inverse percent change in demand. If elasticity is unitary, a change in price does non change total revenue. Several factors contribute to a products demand elasticity: 1.

Availability of Substitutes Elasticity go away be greater when thither are more than(prenominal) akin or similar interfere goods available for example, there is much little difference among competing brands. If no identical or substitute goods are available, the demand provide be springless. Examples of inelastic g oods are salt, gasoline and coffee. 2. ! Level of Necessity (or Luxury) the more obligatory a good, the more inelastic (for example, flour) whereas an elastic good will loosely be considered luxurious in nature. 3. Time the more length of service a price change, the greater a goods elasticity since consumers will have more time to hunt for alternatives or substitutes. 4. Proportion of Income or reckon the higher the percent of budget or income that a spot consumes, the greater its elasticity....If you take to get a full essay, come out it on our website: BestEssayCheap.com

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