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 “the degree of responsiveness of demand to changes in price”. 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
