Elasticity- The measure of sensitivity of quantity supplied to changes in price.
Demand Elasticity- The measure of responsiveness of the consumers to the changes in price.
Classification of Demand Elasticity
1.Elastic Demand- when the quantity demanded is greatly affected by the changes in price.
2.Inelastic Demand- the quantity demanded increase in price creates a lesser change in the percentage in quantity demanded.
3.Unitary Demand- when there is an equal change in quantity demanded and the price.
4.Perfectly Elastic Demand- the demand continues to increase without the change in price.
5.Perfectly Inelastic Demand- when there is a constant demand while the price is continuously increasing.
Table Ellustration of Classification of Demand Elasticity
perfectly elastic demand
perfectly inelastic demand
Determinants of Demand Elasticity
1.The price of the consumers budget.
The quantity demanded depends on the budget or the income of the consumer. it is usually on the elastic type of demand. One example of this is the things that are not necessary in our lives like cars,appliances. When their price increase, the consumers can easily take away from their list those unecessary things.
2.Availability of the substitutes.
It is when the price of the primary goods gets higher, the closer the consumer will transfer to the substitutes. But, it is considered as an inelastic demand.
3.Types of Good.
It depends on the type of good that the consumers intended to buy, it is what we called the semi-necessary goods for the consumers.
4.The time under consideration.
When the price of the product continously increasing, the consumers will learn to adopt the substitutes over a period of time. Some example is rice, when the price of the rice is continously increasing, the consumers will transfer to its substitutes like bread, corn, and cereals.
Supply Elasticity- refers to the reaction or response of the sellers or producers to price change of goods.
Types of Supply Elasticity
1.elastic supply- a change in price results to a greater change in quantity supplied.
2.inelastic supply- a change in price results to a lesser change in quantity supplied.
3.unitary supply- a change in price results to an equal change in quantity supplied.
4.perfectly elastic supply- without change in price, there is an infinite or unlimited change in quantity supplied.
5.perfectly inelastic supply- a change in price has no effect in quantity supplied.
Table Illustration of Supply Elasticity
perfectly elastic supply
perfectly inelastic supply
Determinants of Supply Elasticity
1.Time- a period of time the products produced either short time or long time.
2.Technology- because of technology, the products can be produced efficiently.
Theory of Consumer Behavior
1.Law of Diminishing Marginal Utility
Marginal utility refers to the additional satisfaction of a consumer whenever he consumes one more unitof the same goods.
Quantity of Goods consumed
*When your consumerism increases, your marginal utility will decrease.
The word indifference curve means “showing no bias or neutral”.
Kl. Of meat
Kl. Of fish
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