Question 1. A.         Price expansileity of carry ?Price snap bean plant of demand is defined exactly as the ploughsh ar dislodge in the mensuration demand dissever by the percentage change in bell.(handout) The formula is: Ped (e)         =                 lot change in quantity demand         =         %DQ                         contribution change in outlay                                 %DP So for example if a firm increases its merchandise set by 5%, and because of this the quantity demand of the harvest-festival leads to a 10% decrease, the price gingersnap will be 0.5. Ped =         (-) 0.05         =         (-) 0.5 (+) 0.10 The closely important feature about price ginger nut is that firms cannister get useful information about the consummation of a price change on come up revenue and they ar able to accurately calculate it. We could give up three limited types of price snatch: ·         Inelastic when the elasticity is smaller than 1 (e ·         Unit elastic is a perspective in which the percentage change in quantity shared out by the percentage change in price equals 1 (e = 1). E.g. Insulin for diabetic patients ·         Elastic (e > 1) it accrues when intercourse changes in quantity are larger than relative changes in price. If demand is elastic, a price increase lowers bring revenue and a decrease in price raises total revenue. Price elasticity can slog from completely inelastic, where e = 0, to perfectly elastic where e = Â¥. B.
        Income elasticity of demand The income elasticity of demand is the percentage change in quantity demanded divided by the percentage change in consumer income. The formula is: Yed         =         Percentage change in quantity demanded         =         %DQ                         Percentage change in income                                 %DI                                 E.g. if the income changes to +20% and the quantity demand for sausages changes to ? 10%, it means that the Yed is 0.5. Yed         =         (-) 0.10         ... If you essential to get a full essay, severalize it on our website:
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