What are the different kinds of elasticity of supply? Elasticity of supply of a commodity is the degree of responsiveness of the quantity supplies to changes in price. Like the elasticity of demand, the elasticity of supply..
What are the factors that determines the elasticity of supply of a commodity? Elasticity of supply plays a very important role in determining prices of products. The extent of rise in price of a commodity depends on the elasticity of supply.
Elasticity of demand is known as price-elasticity of demand. Because elasticity of demand is the degree of change in amount demanded of a commodity in response to a change in price.
9 most essential factors that determines the elasticity of demand are : 1. Nature of goods 2. Availability of substitutes 3. Alternative use 4. Possibility of postponing consumption 5. Proportion of income spent 6. Price-level 7. Force of habit 8. Durability of commodities and 9. Income level.
The law of demand indicates the direction of change in quantity demanded in response to a change in price. It does pot precisely express the magnitude of change in amount demanded in response to a change in price.
The law of demand states that that there is and inverse relationship between price and quantity demanded. However, it does not explain as to how much change will take place in demand as a result of a given change in price.
The law of demand establishes an inverse relationship between quantity demanded and the price of the commodity. But this law does not state the degree of change in demand due to change in price.
There are several factors governing the elasticity of demand for a commodity. They are explained below. A commodity will have elastic demand if there are good substitutes for it. A small rise in the price of a commodity will send buyers to the substitutes. A lower price of a commodity will invite the former buyers of the substitute goods.
As in most cases, price elasticity of demand is dependent upon a number of factors, of which the most important ones are the following. Generally speaking, a consumer can choose between several goods for satisfying a given want. Therefore, the demand for a good is affected not only by its own price but also by the prices of its substitutes.
The change in the demand of one good (X) in response to a change in the price of another good (Y) is called 'cross elasticity of demand'. Its measure is-( Proportionate Change in Demand for X)/(Proportionate Change in Price of Y).