Elasticity of demand measures the responsiveness

of change in quantity demanded of a good because of change in prices or income.

 PRICE ELASTICITY OF DEMAND

CROSS ELASTICITY OF DEMAND

INCOME ELASTICITY OF DEMAND

ADVERTISING ELASTICITY OF DEMAND

 Price elasticity of demand (PED or E d ) is a

measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall.

 Price elasticity of demand (PED or E d ) is a

measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price (holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall.

 Veblen and Giffen goods have +ve PED Revenue is maximised when price is set so

that the PED is exactly one. The PED of a good can also be used to predict the incidence (or "burden") of a tax on that good. Various research methods are used to determine price elasticity, including test markets, analysis of historical sales data and conjoint analysis. PED can vary at different points along the demand curve, due to its percentage nature.

 Availability of Close Substitute Necessities Luxuries Definition of the Market Time Horizon Age

Interpreting values of price elasticity coefficients

 when the percentage change in quantity

demanded is less than the percentage change in price (so that Ed > - 1)

Price Gouging/ Life and Death

 when the percentage change in quantity

demanded is greater than the percentage change in price (so that Ed < - 1).

 when the percentage change in quantity

demanded is equal to the percentage change in price (so that Ed = - 1)

 the cross elasticity of demand or cross-price

elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good The formula used to calculate the coefficient cross elasticity of demand is

 10% increase in the price of fuel,

20% decrease in demand of fuel inefficient cars

Cross elasticity would be

 Increase in price of carbonated drinks

Increase in demand for non carbonated soft

drinks

Carbonated drinks

Non-Carbonated drinks

Suppose the price of Carbonated drinks rises from P1 to P2 because one of the inputs rises in price. This would cause people to consume less carbonated drinks , quantity decreases from Q1 to Q2. For the substitute good Non carbonated drinks the demand curve shifts out for all price levels, from D to D , leading to more of the substitute good consumed.

Thank you

References
http://www.wikipedia.org/

http://mrski-apecon-2008.wikispaces.com http://www.tutor2u.net

http://www.mgmtmaterial.com