Economics Elasticity Essay -- Price Elasticity of Demand

Businesses know that they face require curves, but rarely do they knowwhat these curves look like. Yet sometimes a business demand to have agood idea of what part of a demand curve looks like if it is to makegood decisions. If Ricks Pizza raises its costs by cristal percent, whatwill happen to its revenues? The answer depends on how consumers willrespond. Will they disregard back purchases a little or a lot? This drumheadof how responsive consumers are to bell neuters involves the economicconcept of ginger nut.Elasticity is a prevention of responsiveness. Two words are importanthere. The word measure means that piece of cake results are reported asnumbers, or elasticity coefficients. The word responsiveness meansthat there is a stimulus-reaction involved. Some permute or stimulusca lend oneselfs people to react by changing their behavior, and elasticitymeasures the extent to which people react.The most common elasticity measurement is that of price elasticity ofdemand. I t measures how much consumers respond in their buyingdecisions to a change in price. The basic formula used to determineprice elasticity isIf price sum ups by 10%, and consumers respond by decreasingpurchases by 20%, the equation computes the elasticity coefficient as-2. The result is ostracise because an increase in price (a positivenumber) leads to a decrease in purchases (a negative number). Becausethe law of demand says it will always be negative, many economists pretermit the negative sign, as we will in the following discussion.An elasticity coefficient of 2 shows that consumers respond a greatdeal to a change in price. If, on the other hand, a 10% change inprice causes only a 5% change in sales, the elasticity coefficient... ...tical try curve. For example, if on December 1 the price of applesdoubles, there will be minimal effect on the number of applesavailable to the consumer. Producers cannot make adjustments until anew growing season begins. In the short bear, produc ers can use theirfacilities more or less intensively. In the apple example, they can depart the amounts of pesticides, and the amount of labor they use topick the apples. Finally, in the long run not only can producerschange their facilities, but they can disappear the industry or newproducers may enter it. In our apple example, new orchards can beplanted or old ones destroyed. computer address ConsultedVitali Bourchtein The Principles of Economics Textbook An Analysis of Its Past, Present & Future May 2011 net 15 May 2015.http//www.stern.nyu.edu/sites/default/files/assets/documents/con_042988.pdf