Elasticity of Demand:
The law of demand is straight forward. It tells us
when the price of a good rises, its quantity demanded will fall, all other
things held constant.
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We have stated demand for a product is sensitive or
responsive to price change. The variation in demand is, however, not uniform
with a change in price.
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There are three methods of measuring price elasticity
of demand. (1) Total Revenue Method (2) Geometrical Method (3) Arc Method.
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The quantity of a commodity demanded per unit of time
depends upon various factors such as the price of a commodity,
the money income of the prices of related goods, the tastes of
the people, etc., etc.
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The price elasticity of
demand is not the same for all commodities. It may be or low depending upon
number of factor.
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The concept of elasticity of demand is very useful as
it has got both theoretical and practical advantages.
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