In order to continue enjoying our site, we ask that you confirm your identity as a human. Thank you very much for your cooperation. Business men know that they face demand curves, but rarely do they know what these curves look like. Yet sometimes a business needs to have a good idea of what part of a demand curve looks like if it is to make good decisions. If Rick's Pizza raises its prices by ten percent, what will happen to its revenues? The answer depends on how consumers will respond. Will they cut back purchases a little or a lot? This question of how responsive consumers are to price changes involves the economic concept of elasticity. As developed by Alfred Marshall, the concept of elasticity was applied to elasticity of price. But later on, the concept was made more broader. Elasticity of demand is a concept of showing the responsiveness of demand. As we well-known earlier, changes in demand can be caused by several factors which determine demand for a good or commodity. Obviously, demand is responsive to each of these factors i.e. But all the factors are not equally important from the point of view of either theoretical analysis or practical means. For example, take tastes or preference of the consumers, is an exogenous factor and there is no point in measuring the responsiveness of demand to this factor, though in practice this factor is important. Efforts, therefore are made to measure the responsiveness of demand to changes in certain important factors like price, income, prices of related products, sales promotion etc. Let us take price as a factor for understanding the elasticity concept. When considering the responsiveness of the quantity demanded to change in price of a commodity, we may make some statements such as : 'The demand for sugar was more responsive to price-changes twenty years ago than it is today', or the demand for milk responds more to price changes than does the demand for tea'. It is thus clear that the degree of responsiveness of quantity demanded to price changes varies from product to product. Elasticity of demand indicates the degree of responsiveness of quantity demanded to changes in market price. Hence this becomes the concept of price-elasticity of demand. DEGREES OF PRICE ELASTICITY Different commodities have different price elasticities. Some commodities have more elastic demand while others have relative elastic demand. Basically, the price elasticity of demand ranges from zero to infinity. It can be equal to zero, less than one, greater than one and equal to unity. According to Dr. Marshall : "The elasticity or responsiveness of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price and diminishes much or little for a given rise in price."However, some particular values of elasticity of demand have been explained as under ; Types of Price Elasticity of Demand:- MEASUREMENT OF PRICE ELASTICITY OF DEMAND There are five methods to measure the price elasticity of demand.
Total Expenditure Method Dr. Marshall has evolved the total expenditure method to measure the price elasticity of demand. According to this method, elasticity of demand can be measured by considering the change in price and the subsequent change in the total quantity of goods purchased and the total amount of money spend on it. Proportionate Method This method is also associated with the name of Dr. Marshall. According to this method, "price elasticity of demand is the ratio of percentage change in the amount demanded to the percentage change in price of the commodity." It is also known as the Percentage Method, Flux Method, Ratio Method, and Arithmetic Method.
1 a stage in a scale of relative amount or intensity
2 an academic award conferred by a university or college on successful completion of a course or as an honorary distinction (honorary degree)
3 any of three categories of seriousness of a burn
4 (in the U.S.) any of the categories into which a crime is divided according to its seriousness
5 (Genealogy) a step in a line of descent, used as a measure of the closeness of a blood relationship
6 (Grammar) any of the forms of an adjective used to indicate relative amount or intensity: in English they are positive, comparative, and superlative
7 (Music) any note of a diatonic scale relative to the other notes in that scale
8 a unit of temperature on a specified scale
9 a measure of angle equal to one three-hundred-and-sixtieth of the angle traced by one complete revolution of a line about one of its ends., (Symbol) ° See also → minute 1 → 2 → second 2 → 2
a a unit of latitude or longitude, divided into 60 minutes, used to define points on the earth's surface or on the celestial sphere
b a point or line defined by units of latitude and/or longitude., (Symbol) °
11 a unit on any of several scales of measurement, as for alcohol content or specific gravity., (Symbol) °
a the highest power or the sum of the powers of any term in a polynomial or by itself
b the greatest power of the highest order derivative in a differential equation
14 Archaic a stage in social status or rank
15 ♦ by degrees little by little; gradually
16 ♦ to a degree somewhat; rather
17 ♦ degrees of frost See → frost → 3 degree day degree-day
1 (Physics) one of the minimum number of parameters necessary to describe a state or property of a system
2 one of the independent components of motion (translation, vibration, and rotation) of an atom or molecule
3 (Chem) one of a number of intensive properties that can be independently varied without changing the number of phases in a system
4 (Statistics) one of the independent unrestricted random variables constituting a statistic first-degree burn second-degree burn third degree third-degree burn Welcome to English-Definition Collins dictionary ("Collins English Dictionary 5th Edition first published in 2000 © HarperCollins Publishers 1979, 1986, 1991, 1994, 1998, 2000 and Collins A-Z Thesaurus 1st edition first published in 1995 © HarperCollins Publishers 1995"). Type the word that you look for in the search box above. The results will include words and phrases from the general dictionary as well as entries from the collaborative one. |
What is meant by degree of responsiveness?
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