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Elasticity of demand

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Elasticity of Demand

Elasticity of demand is a measure of how sensitive the demand for a product or service is to changes in its price. It is a measure of how much the quantity demanded of a good or service changes when its price changes. It is used to measure the responsiveness of the quantity demanded of a good or service to a change in its price. It is an important concept in economics and is used to determine the pricing strategies of businesses.

History of Elasticity of Demand

The concept of elasticity of demand was first introduced by Alfred Marshall in his book Principles of Economics in 1890. He defined it as โ€œthe degree of responsiveness of demand to changes in priceโ€. Since then, the concept has been used extensively in economics and business to measure the responsiveness of demand to changes in price. It is also used to measure the sensitivity of demand to changes in other factors such as income, advertising, and availability of substitutes.

Table of Comparisons

Price Elasticity of Demand Description
Elastic Quantity demanded changes significantly with a small change in price.
Inelastic Quantity demanded changes slightly with a small change in price.
Unitary Elastic Quantity demanded changes proportionally with a change in price.

Summary

Elasticity of demand is an important concept in economics and business. It is used to measure the responsiveness of the quantity demanded of a good or service to a change in its price. It is also used to measure the sensitivity of demand to changes in other factors such as income, advertising, and availability of substitutes. For more information about elasticity of demand, you can visit websites such as Investopedia, Khan Academy, and Economics Online.

See Also

  • Price Elasticity of Supply
  • Cross Elasticity of Demand
  • Income Elasticity of Demand
  • Advertising Elasticity of Demand
  • Substitution Effect
  • Price Discrimination
  • Price Floor
  • Price Ceiling
  • Marginal Revenue
  • Marginal Cost

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