The proportional change in quantity supplied due to a proportional change in the price of a good or service is called elasticity of supply.” Symbolically, Mathematically speaking, if we divide the marginal supply function by the average supply function (Qs/P), we find price elasticity of supply. Marginal supply function or slope of supply function; and Qs/P = Average supply function It means that the elasticity of supply is the product of marginal supply function and … [Read more...] about Price Elasticity of Supply [Measurement Methods]
Economy
Rise and Fall in Supply Curve – Shifting of Supply Curve
If there is a change in quantity supplied due to change in factors other than product’s price i.e.method of production, price of inputs etc, OR a change in product’s price leads to no change in quantity supplied, it is known as rise (or increase) and fall (or decrease) in supply. In such cases, whole supply schedule changes and supply curve shifts. [note] Thus it is also called shifting of the supply curve. Now we discuss this phenomenon in detail. Causes of Changes in supply Changes in … [Read more...] about Rise and Fall in Supply Curve – Shifting of Supply Curve
Rise and Fall of Demand Curve – Shifting in Demand
If there is a change in quantity demanded due to change in factors other than product’s price i.e. consumer’s income, taste etc OR a change in product’s price leads to no change in quantity demanded, it is known as rise (or increase) and fall (or decrease) in demand. In such cases, whole demand schedule changes and demand curve shifts. [note] Thus it is also called shifting of the demand curve. Now we discuss this phenomenon in detail. Rise (or Increase) in Demand Rise in demand … [Read more...] about Rise and Fall of Demand Curve – Shifting in Demand
Cross Elasticity of Demand
Proportional change in quantity demanded of one good due to the proportional change in the price of another good, is called cross-elasticity of demand. Thus: The concept of cross elasticity of demand appears in case of related goods, i.e. substitute goods and complementary goods. Cross elasticity is positive for substitute goods and negative for complementary goods. Substitute Goods Generally speaking, “The goods which can be used in place of each other, are called substitute … [Read more...] about Cross Elasticity of Demand
Extraction and Contraction of Demand
If there is a change in quantity demanded due to a change in price of the commodity or service while other factors are held constant, it is known as changes in quantity demanded or extension / contraction of demand curve. When we show extension or contraction in a diagram, we remain on the same demand curve moving from one point to another point. Hence, it is also called movement along the demand curve. [note] Extension of Demand Other things remaining the same, higher quantity demanded … [Read more...] about Extraction and Contraction of Demand
How to Calculate Income Elasticity of Demand
Proportional change in quantity demanded due to a proportional change in consumer’s income, is called income elasticity of demand. We measure income elasticity of demand with help of the following formula Income elasticity can be calculated as under The concept of income elasticity of demand is used to differentiate normal goods and inferior goods. Normal Goods The goods, for which income elasticity of demand is positive, are called normal or superior goods. It is explained … [Read more...] about How to Calculate Income Elasticity of Demand
10 Importance of Elasticity of Demand
Guidance for Finance Minister The concept of elasticity of demand provides a guideline to the finance minister to impose taxes on different commodities. He will impose more taxes on goods for which demand is more elastic i.e. luxuries and fewer taxes on those for which demand is less elastic i.e. necessities of life. Guidance for Price Determination Producers determine the prices of their products on the basis of this concept. They increase the prices of less elastic goods and vice … [Read more...] about 10 Importance of Elasticity of Demand
16 Major Difference between Public and Private Finance
The term “finance” is associated with revenue and expenditure. Public finance is a branch of Economics which deals with the government’s revenue and expenditures of an economy. If it is related to the private sector, it is called private finance. Finance includes those means by which we make various types of payment. It may be defined as the provision of money at the time of need. In other words, it is the arrangement of money sources and the acquisition of funds for the satisfactory conduct … [Read more...] about 16 Major Difference between Public and Private Finance
Advantages and Disadvantages of Short Term Credit
Creditor's funds are available at easy rates than the owner's funds. The creditors generally agree to receive a lower rate of interest. But on the other side, the owner's demand for more protection and security of their capital invested. Creditors have no right to participate in the activities of the business to which they are advancing funds. So owners may utilize the number of creditors for the best interest of their business. But the desired position may not be maintained in case of … [Read more...] about Advantages and Disadvantages of Short Term Credit
10+ Determinants of Price Elasticity of Demand
Nature of the Commodity In the case of basic necessities of life, Ep. is less elastic while in case of luxurious goods, Ep is more elastic. In other words, a higher change in the price of necessity brings a small change in its Qd while a smaller change in the price of a luxurious good brings a big change in its Qd. A Case of Substitutes In case of the availability of the substitute for any commodity, Ep is more elastic e.g. a slight increase in the price of Coca Cola brings about a … [Read more...] about 10+ Determinants of Price Elasticity of Demand