Applications of law of demand,
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The document discusses the law of demand and elasticity of demand. It defines the law of demand as stating that, other things equal, demand increases as price decreases and decreases as price increases. It defines elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. It then defines price elasticity of demand, income elasticity of demand, and cross elasticity of demand. Finally, it discusses applications of the law of demand including price determination, government policy formulation, demand forecasting, and international trade. It also discusses uses of elasticity of demand in business for price strategy, marketing, and production.
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UNIT 2 (1).pptx
Okay, here are the steps:
* Original quantity demanded (Q1) = 3000
* Original income (Y1) = Rs. 80,000
* New quantity demanded (Q2) = 3050
* New income (Y2) = Rs. 81,000
* % change in quantity = (Q2 - Q1)/Q1 * 100 = (3050 - 3000)/3000 * 100 = 1.67%
* % change in income = (Y2 - Y1)/Y1 * 100 = (81,000 - 80,000)/80,000 * 100 = 1.25%
* Income elasticity of demand (Ey) = % change in quantity / % change in income
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2) There are three main types of elasticity of demand - price elasticity of demand, which measures the responsiveness of quantity demanded to a change in price of the good; income elasticity of demand, which measures the responsiveness to a change in consumer income; and cross elasticity of demand, which measures the responsiveness to a change in price of a related good.
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- Supply is the quantity of a good producers are willing to provide at a given price, defined by a supply curve showing the positive relationship between price and quantity supplied.
- Determinants like tastes, income, and expectations can cause shifts in the demand curve, while costs and technology can shift the supply curve.
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UNIT 2 (1).pptx
Okay, here are the steps:
* Original quantity demanded (Q1) = 3000
* Original income (Y1) = Rs. 80,000
* New quantity demanded (Q2) = 3050
* New income (Y2) = Rs. 81,000
* % change in quantity = (Q2 - Q1)/Q1 * 100 = (3050 - 3000)/3000 * 100 = 1.67%
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* Income elasticity of demand (Ey) = % change in quantity / % change in income
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This document discusses the concept of elasticity in economics. It defines three types of elasticity - price elasticity of demand, income elasticity of demand, and cross elasticity of demand. Formulas are provided for calculating each type. The degrees of elasticity are also explained, including perfectly elastic demand, unitary elastic demand, perfectly inelastic demand, and relatively elastic/inelastic demand. Finally, several methods for measuring price elasticity are outlined, including the total expenditure method, geometrical/point elasticity method, and arc method.
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The document discusses different types of elasticity of demand including price elasticity, income elasticity, cross elasticity, advertising elasticity, and expectation elasticity. It provides definitions and formulas for calculating each type. Factors that affect elasticity include the nature of the commodity, substitutes, uses, price level, and budget. Elasticity is used in business decisions, economic policies, public utilities, taxation, and international trade. The slope of the demand curve and price elasticity are inversely related.
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"Introduction to normalization of demand data
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Price Elasticity of Demand
Price Elasticity of Demand measures how responsive demand is to changes in price. It is calculated by taking the percentage change in quantity demanded divided by the percentage change in price. Perfectly inelastic demand does not change with price changes. Inelastic demand changes less than proportionately to price changes. Unit elastic demand changes proportionately. Elastic demand changes more than proportionately. Factors like substitutes, necessity, income share, and time period impact price elasticity. Producers use elasticity estimates to predict revenue and tax impacts and for price discrimination.
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This document discusses demand, including the demand schedule, demand curve, individual demand function, market demand function, and the law of demand. It explains that demand is the willingness and ability to purchase a good at various prices. The law of demand states that, with all else held constant, quantity demanded varies inversely with price. It also covers elasticity including price elasticity, income elasticity, and cross elasticity. Price elasticity measures the responsiveness of quantity demanded to a price change. Elasticity is important for business and government decision making.
THEORY OF DEMAND AND SUPPLY
This document defines key economic concepts related to demand and supply, including:
- Demand is the desire and ability to purchase goods, defined by a demand schedule and curve showing the relationship between price and quantity demanded.
- The law of demand states that as price increases, quantity demanded decreases, assuming other factors remain constant.
- Supply is the quantity of a good producers are willing to provide at a given price, defined by a supply curve showing the positive relationship between price and quantity supplied.
- Determinants like tastes, income, and expectations can cause shifts in the demand curve, while costs and technology can shift the supply curve.
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- 2. LAW OF DEMAND •Law of demand states, that other things being equal, the demand for a good extends with fall in price and contracts with a rise in price.
- 3. ELASTICITY OF DEMAND % Change in quantity demanded E = % Change in price
- 4. PRICE ELASTICITY OF DEMAND The % change in the quantity demanded that results from a one % change in its price. P Q D D P % %
- 5. INCOME ELASTICITY OF DEMAND INCOME ELASTICITY= %CHANGE IN QUANTITY DEMAND % CHANGE IN INCOME
- 6. CROSS ELASTICITY OF DEMAND • CROSS ELASTICITY OF DEMAND= % CHANGE IN DEMAND OF ‘X’ % CHANGE IN PRICE OF ‘Y’
- 7. APPLICATIONS OF LAW OF DEMAND • Significance in Price Determination. determination of price under monopoly, price discrimination, Remuneration of factor of production , Dumping. • Importance in Government Policy Formulation. Advantage to finance minister, distribution of burden of taxation, Price control policy, protection to industries. • Demand Forecasting • Fixation of Rail Freight charges • Wage Determination
- 8. •International Trade •Paradox of Poverty •Effect on Employment
- 9. Use of ELASTICITY OF DEMAND in business management •IN PRICE STRATEGY •IN MARKETING •IN PRODUCTION
- 10. THANKYOU