Importance of elasticity of demand pdf

In case the demand is inelastic, they are then in a position to charge higher price for a commodity. The importance of elasticity of demand 5 important points. Demand can be classified as elastic, inelastic or unitary. In a free capitalistic economy, production mainly depends on consumer demand and care should be taken to. The concept of elasticity of demand is of crucial importance in many aspects of international trade. The concept of elasticity of demand is very useful as it has got both theoretical and practical advantages. Discuss factors that determine demand and supply elasticity. Pdf the concept of elasticity of demand and why it is important. The concept of elasticity of demand and why it is important for a firm to have the knowledge of price elasticity of demand. The success of the policy of devaluation to correct the adverse balance of payment depends upon the elasticity of demand for exports and imports of the country. The concept of elasticity for demand is of great importance for determining prices of various factors of production. Some important points from which you can realize the important of price elasticity of demand. The following points highlight the ten main areas of importance of elasticity of demand in management. Change in price of a good brings about a change in the quantity demanded depending upon the value of elasticity of demand.

The importance of elasticity of supply economics help. The concept of elasticity of demand has an important role to play in the determination of the rewards for factors of production in a priceenterprise economy. Elasticity of demand is an important variation on the concept of demand. Factors of production are paid according to their elasticity of demand. The concept of elasticity is of great importance to businessmen. When the demand of a good is elastic, they increases sale by towering its price. Government can impose higher taxes on goods with inelastic demand, whereas, low rates of taxes are imposed on commodities with elastic demand. Pdf the concept of elasticity of demand and why it is. The law of demand indicates the direction of change in quantity demanded to a change in price. In order to fix prices of the goods to be exported, it is important to have knowledge about. Importances of price elasticity of demand are given below. The concept of price elasticity of demand is important for formulating government policies, especially the taxation policy. Elasticity is important in determining whether a change in the price of a good will.

Price elasticity of demand is a very important concept. Elastic demand e lasticity of demand is an important variation on the concept of demand. As regards its importance in the academic interest, the concept, is very helpful in the theory of value. A read is counted each time someone views a publication summary such. The importance of elasticity of supply price elasticity of supply measures the relationship between change in quantity supplied and a change in price. Its importance can be realized from the following points. If the demand for a product is inelastic, the producer can charge high price for it, whereas for an elastic demand product he will charge low price. The importance of elasticity of demand can be realised as follows. To enable learners to understand concept of elasticity of demand and its application in. The concept of elasticity of demand is of considerable significance in various situations. He should consider whether a lowering of price will stimulate demand for his product, and if so to what extent and whether.

However the importance of firm having the knowledge of price elasticity of demand was well explained with examples and linked to some really life problems. In other words, if the demand of a factor is inelastic, its price will be high and if it is elastic, its price will be low. Given this combination of widely available substitutes and high importance to many parents, it is not surprising that the existing research places the demand. The importance of the price elasticity of demand, which measures the responsiveness of the quantity demanded. Crossprice elasticities tend to be negative when two goods are complements. Price elasticity of demand ped measures the percentage change in the price of a product, to the percentage change of demand for that same.