Price Elasticity of Gold
Group name: In-Demand
The general inverse relationship between price and demand is a key fundamental in economics. A rise in price is known to shrink demand and vice versa. However, another important factor in economics is the price elasticity of demand, which can be interpreted as the percentage change in demand relative to the percentage change in price. Basic goods tend to be of low elasticity, thus the change in price has little effect on demand, while luxury goods are usually of high elasticity where demand varies greatly opposing a slight change in prices.

In our analysis of the worldwide demand for gold over the past 3 years, the trend shows that a decrease in price leads to a decrease in the demand for gold and vice-versa. This shows that consumers are willing to pay a higher price for gold than a lower one.

The below data and graph depicts the price-demand relation of gold over the past 3 years: Quarter – Year| Quantity demanded (in thousand tons)| Price ($US bn)| Price Elasticity | Q1 – 08| 13.4| 450| -|

Price Elasticity: ΔQuantity DemandedΔPrice X Initial PriceInitial Quantity

Demand curve of gold from 2008 – 2010 per quarter

Price Elasticity of gold from 2008-2010
Gold, being a luxury product wherein the price elasticity is high i.e. an increase / decrease in price leads to a high change in demand. A couple of factors affecting the high elasticity of gold are: * The snob effect: preference for goods because they are different from those commonly preferred; in other words, for consumers who want to use exclusive products, price is quality...

...maximize revenues from sales and minimize the costs of doing business. One way to determine the correct pricing for a product would be to use the concept of elasticity of demand. This paper will look at elasticity and the factors that go into calculating it, and describe how using elasticity could help Apple Inc. (Apple) maximize its revenue from the iPod. Finally, this paper will describe how a change in consumer income will affect the overall demand for iPods.
Priceelasticity is a tool designed to identify the overall change in demand or supply of a product compared to the overall movement of price. For the sake of this paper, we will focus on the overall change in demand from consumers. Elasticity is calculated by creating a ratio of the percentage change in demand of a good compared to the percentage change in price. If the percentage change in demand is greater than the percentage change in price, the product would have a ratio of more than 1, and would therefore be considered elastic. If the ratio were greater than 1, that product would then be considered inelastic, as the percentage change in demand was less than that of the percentage change in price. For example, if a product were to increase in price by 10%, and the overall demand fell by only 5%, then the good would be considered inelastic. If a 10% rise in...

...when I think of priceelasticity. Included in my list are fuel, cigarettes, electricity, and toilet paper.
Priceelasticity means that the behaviors of supply and demand are not affected when the price of that particular item rises (changes).
Our local power companies experience priceelasticity on the energy that we demand, when they continually raise prices but the amount of consumer usage is unaffected. In some parts of the country their may be alternatives such as gas heat and fire places which would all contribute to less usage thereby decreasing the likelihood of the price of being inelastic since there would be substitutions. So, rate increases to our power bills increases revenue for the power companies. There is little to analyze since there are no complements. The demand for energy is inelastic so total revenue increases. Elasticity is when there are few variables to change the consumption habits in this particular example, thereby resulting in increased total revenues. However, when there are considerably more variables affecting supply and demand; substitutions is one variable that may actually cause a decrease in total revenue because the price of power has now become elastic when consumers refuse to use power because of the rate increases and they have an alternative source.
According to...

...Definition of 'PriceElasticity Of Demand'
A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Priceelasticity of demand is a term in economics often used when discussing price sensitivity. The formula for calculating priceelasticity of demand is:
PriceElasticity of Demand = % Change in Quantity Demanded / % Change in Price
If a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). Conversely, a product is inelastic if a large change in price is accompanied by a small amount of change in quantity demanded.
Investopedia explains 'PriceElasticity Of Demand'
Priceelasticity of demand measures the responsiveness of demand to changes in price for a particular good. If the priceelasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes). Values between zero and one indicate that demand is inelastic (this occurs when the percent change in demand is less than the percent change in price). When price...

...Economics assignment
Take a brand study its priceelasticity of demand and relate it to revenue. Say how the REVENUE of the product increases or decreases because of the ELASTICITY.
The elasticity of demand measures the responsiveness of the quantity demanded of a good, to change in its price, price of other goods and change in consumer’s income. Accordingly elasticity of demand is of three types:
Priceelasticity of demand
Income elasticity of demand
Cross elasticity of demand
Priceelasticity of demand: it is the ratio of the percentage change in quantity demand of a commodity to the percentage change in its price. Priceelasticity of demand denotes the ratio at which the demand contracts with a rise in price and extends with a fall in price.
Ed=(percentage change in quantity demanded)/(percentage change in price)
Ed=ΔQ/ΔP×P/Q; where P=price; Q= quantity demanded.
Priceelasticity of demand is of five types:
Perfectly inelastic(Ed=0)
Perfectly elastic(Ed=∞)
Relatively inelastic(Ed1)
Unitary elastic(Ed=1)
Cadbury dairy milk chocolates:
It is a brand of chocolate bar made by the Cadbury plc unit of Kraft foods. It first started sales in UK in the...

...PriceElasticity of Demand
T's Jean Shop sells designer jeans. The latest trend setter has been Capri cuffed blue jeans. The demand for the Capri jeans has been very high with teenagers and young women. The business has increased its supply of Capri jeans due to the high demand. The owner, Terri Johnson, contemplates increasing the price from $9.00 to $10.00. Ms. Johnson needs to know the response of the consumers to the increasedprice. According to McConnell and Brue (2004), the PriceElasticity of Demand measures the rate of response of quantity demanded due to a price change (p. 1).
Using PriceElasticity of Demand
In calculating the PriceElasticity of Demand, we use the formula:
percentage change in quantity
demanded of product X
Ed = percentage change in price
of product X
The percentage change in quantity demanded is divided by the percentage change in price.
change in quantity demanded of X
Ed = original quantity demanded of X
change in price of X
original price of X
According to Economics.about.com, there is another way to view this equation (www.economics.about.com). The equation is:
The percentage of change...

...Technical Problem 10 Chapter 6
10. Use the figure below to answer the following questions:
a. Calculate priceelasticity at point S using the method E=ΔQ × P
ΔP Q
E=ΔQ P+ 90 100
ΔP × Q= −300× 60 =−0.5
b. Calculate priceelasticity at point S using the method E=P
P−A
E=P × 100 = 100 =−0.5
P−A 100−300 −200
c. Compare the elasticities in parts a and b. Are they equal? Should they be equal?
The values of E in parts a and b are equal, as they should be, because the two methods are mathematically equivalent formulas for computing priceelasticity.
d. Calculate priceelasticity at point R.
E= P × 400 = 400 = −1. 33
P−A 400−700 −300
e. Which method did you use to compute E in part d, E=ΔQ × P or E= P ? Why?
ΔP Q P−A
At point R, Q is not given, and ΔQ/ΔP cannot be computed. Thus E = P is the only method to use at point R. P−A
Technical Problem 2 Chapter 7
2. The estimated market demand for good X is
Qˆ = 70 – 3.5P – 0.6M + 4PZ
where Qˆ is the estimated number of units of good X demanded, P is the price of the good, M is income, and PZ is the price of related good Z. (All parameter estimates are statistically significant at the 1 percent level.)
a. Is X a normal or an...

...Assignment 2
PriceElasticity Of Demand
PriceElasticity of Demand is the quantitative measure of consumer behavior whereby there is indication of response of quantity demanded for a product or service to change in price of the good or service ( Mankiw,2007). The PriceElasticity of Demand is calculated using either the point method or the midpoint method.
The Point MethodPriceElasticity of Demand = Percentage change of Quantity Demanded
Percentage change of Price
The Midpoint Method
PriceElasticity of Demand = (Q2 ' Q1) \ [ (Q2 + Q1)/2]
(P2 ' P1) \ [ (P2 + P1)/2]
Were:
Q1= initial Quantity Demanded
Q2 = new Quantity Demanded
P1=Initial Price
P2= new Price
(Source : Mankiw 2007)
A good or service can either be elastic, inelastic or unit elastic. When the priceelasticity of demand of a commodity is elastic this is when the quantity demanded of a good or service responds significantly to the increase or decrease in price. Therefore after calculation the answer is greater than one making it elastic which means that increase in price decreases quantity demanded which in turn causes a decrease in total revenue because the...

...***
1st November 2012
Examine whether the priceelasticity of demand for rice is likely to be elastic or inelastic.
Priceelasticity of demand is the measure of how much of the quantity demanded changes in regards to a change in price. The PED is measured by the following formula: % Change in Quantity Demanded of the product/% Change in Price. If the PED is less than 1, the good is inelastic- indicating that there is a smaller change in quantity demand compared to the price change. When the PED is greater than 1, the good is elastic- meaning the quantity demanded will change significantly compared to a small price change. The priceelasticity for rice could vary throughout several regions- but it can be argued that it is mainly inelastic because of the necessity of the product and the value the product holds in many households. However, in many regions, rice has proved to be elastic because of the number of close substitutes it has.
The percentage change in price is greater than the percentage change in quantity demanded
The percentage change in price is greater than the percentage change in quantity demanded
To begin with, the priceelasticity of demand for rice can be deemed inelastic. Clearly, various households consume rice on a regular basis. Research shows...