Online Economics Tutors Providing Assistance with Price Elasticity
Welcome to myhomeworkhelp.com. With us, you can get price elasticity assignment solutions and assistance from experts on the topic. Price elasticity measures the change in quantity of a product purchased or demanded relative to the change in its price. In economics, price elasticity of demand is the used term, when it comes to explaining price sensitivity.
How to calculate price elasticity of demand?
The price elasticity of demand can be calculated by dividing percentage change in demand by percentage change in price. While calculating this coefficient of price elasticity, you must keep in mind that all other determinants of demand are constant.
According to the law of demand, the demand and price of a good are inversely related. Hence, the coefficient is generally negative. In practical use, the sign is usually ignored. Goods that don’t conform to law of demand are only the ones having a positive elasticity of demand. These are the little things you have to keep in mind while working on your price elasticity homework solutions. If you get confused, you can always seek our help.
Significance of the value of price elasticity
The coefficient of price elasticity of demand can have a numerical value ranging from 0 to infinity. Generally, a good’s demand is considered inelastic when the value less than one. This means that there is a small change in quantity of the good purchased in response to change in price.
The price elasticity coefficient is a pure number, which means it doesn’t have any unit of measurement. The result is accurate only if the change in quantity and price is small. With larger changes, accuracy is compromised.
When the price elasticity of demand is more than one, the good’s demand is considered elastic. This means that the product shows a huge change in demand in response to change in its price. For your price elasticity homework solutions, you must know when the price is elastic or inelastic. Apart from that, you should also know what some specific values mean.
- When the price elasticity of demand is equal to exactly one, it is an indication of unit elasticity. This means change in demand and change in price are exactly proportional. A percentage change in demand results in the exact percentage change in its price.
- The demand is said to be perfectly inelastic if the value of price elasticity of demand is zero. In that case, there is no change in demand for the product with change in its price.
- When the coefficient of price elasticity of demand is equal to infinity, it indicates perfect elasticity of demand. In that case, the consumers buy the product only at a specific price and not any other amount.
Factors that affect price elasticity
When we provide price elasticity assignment solutions, we cover all the necessary aspects of the topic. We also include factors that affect the price elasticity, such as:
- Substitute:
Any product has more chances of being elastic if there are many substitutes available. If there are many brands available, increase in price of one brand would result in people switching to other brands. Hence, even a small price change can result in a great fall in the demand of the product.
- Necessity:
The demand for a good has a tendency of being inelastic if the good is a necessity. This is because consumers will always buy what is absolutely necessary. They need to consume the necessities even if there is an increase in price.
- Habit:
Habitual or addictive products generally have an inelastic demand. This can be seen in case of cigarettes. An increase in price of such products doesn’t have much effect on the demand.
- Time:
Products have a tendency of being more elastic over time. As an example, people eventually adjust to a hike in gasoline price, even if they take time to do so.
To know more, you can ask for price elasticity homework solutions from our expert tutors.
Characteristics of elastic and inelastic goods
In general, there are certain characteristics that set elastic and inelastic goods apart. For your price elasticity assignment solutions, you should know whether a product is likely to have elastic or elastic demand. The characteristics of elastic goods include:
- The goods are expensive and constitute a major percentage of a consumer’s income
- They are luxury products
- A highly competitive market with several substitutes for the products
- Frequently bought products
You should also know the characteristics of inelastic goods for your price elasticity homework solutions. They include:
- Absence of many close substitutes of the product
- They constitute a small percentage of a consumer’s income
- Necessities or addictive in nature
- Infrequently bought products
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