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# Elasticity

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### Elasticity

1. 1. 1 A Study on Types of Elasticity A Mini Project Report in Managerial Economics Submitted to JNTU, Kakinada in Partial Fulfilment for the Award of the Degree of MASTER OF BUSINESS ADMINISTRATION Submitted By Anusha Gopisetty (Reg. No. 13491E0007). DEPARTMENT OF MASTER OF BUSINESS ADMINISTRATION QIS COLLEGE OF ENGINEERING & TECHNOLOGY An ISO 9001: 2008 Certified Institution and Accredited by NBA (Affiliated to JNTU, Kakinada and Approved by AICTE) Vengamukkapalem, Pondur Road ONGOLE –523 272.
2. 2. 2 INDEX: S.NO PARTICULARS PAGE NO 1 Abstract 2 Introduction  Definition  Need to study  Scope of study 3 Objectives 4 Methodology 5 Review of literature 6 Types of Elasticity 7 Conclusion 8 Reference
3. 3. 3 Types of Elasticity Abstract: Prof. Baber has mentioned the following three types of demand based on three important factors [Price of commodity, income of the consumer and prices of related goods] influencing the demand: The elasticity of demand is price, income, cross, adverting demands. Keywords: elasticity of demand; elasticity; demand; Introduction: The changes occurs in quantity demanded of a product because of price, income of the consumer, prices of related goods, taste and preferences of consumers, and advertising effects. These changes are not so far quantified. Measuring these changes is necessary to study the changes in quantity demanded in relation to changes in demand determinants. For measuring these changes we had tool that is elasticity of demand. By using this tool we can measure the effect of changes in any one of the demand determinants. Definition: The terms ‘elasticity’ is defined as the rate of responsiveness in the demand of a commodity for a given change in price or any other determinants of demand. Elasticity of demand is defined as the percentage changes in quantity demanded by one percentage change in demand determinants of consideration, by other determinants held constraint. Need to study: The elasticity of demand is very use full to the organization. The types are using and produce the product in market. This elasticity of demand is important to management. It is necessary that the trader should be aware of the impact of changes in the quantity demanded for a given change in price. Scope of study: Demand is one of the most important economic decision variables. Demand analysis is very crucial For managerial decisions related to market strategy, pricing, advertising, production planning, inventory Management, financial evaluation and investment decisions. Demand is effective want related to given Price and given time period. Objectives:  To know about types of elasticity
4. 4. 4  To know significance of elasticity Methodology:  The project is descriptive & exploratory but constructive in nature.  The secondary data is collected through books, journals, magazines  The primary data is collected through descriptive with acumination expects etc. Review of literature: The presentation of types of elasticity of demand is telling the different types are havening. These are using to the every organization and produce the product. The different type are use full to the company and these elasticity of demand is change to different level of market, so you can utilise the elasticity of demand to produce the product in market. Types of Elasticity: There are 4 types of elasticity of demand  Price elasticity of demand  Income elasticity of demand  Cross elasticity of demand  Advertising elasticity of demand 1. Price elasticity of demand: Elasticity of demand in general refers to the price elasticity of demand. In other words, it refers to the quantity demanded of a commodity in response to a given change in price. Price elasticity is always negative which indicates that the customer tends to buy more with every fall in the price. The relationship between the price & the demand in inverse. In the measured as follows.... Price elasticity of demand= proportional change in the quantity demand for product X Proportional change in the price of X Edp = (Q2-Q1)/Q1/ (P2-P1)/P1 Q1=quantity of demand before price change. Q2=quantity of demand after price change. P1=price before elasticity P2=price after change. Significance of price elasticity of demand: It is necessary that the trader should be aware of the impact of changes in the quantity demanded for a given change in price. He can take a decision as to
5. 5. 5 how much he can supply if he is aware of the likely change in quantity demanded as a result of change in price. 2. Income elasticity of demand: Income elasticity of demand of demand refers to the quantity demanded of a commodity in response to a given change in income of the consumer. Income elasticity is normally positive, which indicates that the consumer tends to buy more and more with every increase in income. Income elasticity of demand= proportional change in the quantity demand for product X Proportional change in the price of X Edi = (Q2-Q1)/Q1/(I2-I1)/I1 Q1=quantity of demand before change. Q2=quantity of demand after change. I1= Income before elasticity I2= Income after change. Positive income elasticity indicates that the demand for the product rises more quickly them the rise in disposable income.In other words, is more responsive to a change in income. Significance of income elasticity of demand: In determining the effects of changes in business activity it is necessary for the trader to be aware of income elasticity of demand for given commodities.With the help of income elasticity of demand , he can estimate the likely changes in the demand for this product as a result of changes in the national income. 3.Cross elasticity of demand: Cross elasticity of demand refers to the quantity demanded of a commodity in response to a change in the price of a related good, which may be substitude or compliment. Income elasticity of demand= proportional change in the quantity demand for product X Proportional change in the price of product X Edc = (Q2-Q1)/Q1/(P2y-P1y)/P1y. Q1=quantity of demanded before change. Q2=quantity of demanded after change. P1y= Price before elasticity P2y= Price after change.