# Importance of elasticity demand

The most important determinants of the price elasticity of demand for a good or service are the availability of substitutes, the importance of the item in household . Price elasticity of demand seeks to explain how a certain product’s quantity demanded by the market responds to variations in its price in certain situations consumers have no choice but to . Demand is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price, so the price elasticity is equal to 1 in absolute value equation of price elasticity of demand - also known as the midpoint formula. Importance of the concept of elasticity of demand: the concept of elasticity of demand has both theoretical and practical value the concept may be used in understanding as well as tackling various economic problems:.

Price elasticity of demand is a way of looking at sensitivity of price related to product demand demand elasticity is an economic concept also known as price elasticity. Price elasticity of demand plays important role in determining the prices of these joint products let us suppose, there has been bumper production of cotton this season as a result, huge amount of cotton as well as cotton seeds have been produced. Examine the importance of the elasticity of demand in a government decision to impose a specific tax on the buyers of cigarettes price elasticity of demand is the .

Importance of the concept of elasticity of demand the concept of elasticity of demand plays a crucial role in the pricing decisions of the business firms and the government when it regulates prices the concept of elasticity is also important in judging the effect of devaluation of a currency on . Income elasticity of demand (yed) measures the degree of responsiveness of demand with respect to change in consumer income ie it is the ratio of percentage change in quantity demanded to the percentage change in income. Importance’s of price elasticity of demand are given below: 1 determination of price policy: while fixing the price of this product, a businessman has to consider the elasticity of demand for the product he should consider whether a lowering of price will stimulate demand for his product, and if . Demand elasticity helps firms model the potential change in demand due to changes in the price of a good, the effect of changes in prices of other goods, and many other important market factors. Why the theories of supply and supply elasticity are important the demand for the hotels in any market is determined basically by the amount of traveller’s .

Elasticity of demand :- elasticity of demand is the rate at which the quantity demanded changes with a change in price in other words we can say that elasticity of demand is the relationship between the proportionate change in price and the proportionate change in quantity demanded. These are some of the important types of elasticity of demand that helps in understanding the criteria of demand for the goods and services and the factors that influence the demand related terms: types of price elasticity of demand. The_importance_of_elasticity_of_supplypdf means that supply can quickly be adjusted to meet changes in demand – this is important in commodity markets .

## Importance of elasticity demand

Cross elasticity of demand: importance and numerical problems very often demands for two goods are so related to each other that when the price of any of them changes, the demand for the other good also changes, its own price remaining the same. Elasticity of demand (and for that purpose, even elasticity of supply) plays an indispensable role in economic decisions of the community this is because whether an economic decision is beneficial or not to the decision-maker unit depends, to a large extent, upon the elasticity of demand of the . The concept of elasticity of demand is of considerable significance in various situations the importance of elasticity of demand can be realised as follows: change in price of a good brings about a change in the quantity demanded depending upon the value of elasticity of demand change in quantity .

Price elasticity of demand (ped) measures the percentage change in the price of a product, to the percentage change of demand for that same . The concept of elasticity of demand is very useful as it has got both theoretical and practical advantages as regards its importance in the academic interest, the concept, is very helpful in the theory of value.

The concept of elasticity is of great importance to businessmen when the demand of a good is elastic, they increases sale by towering its price in case the demand' is inelastic, they are then in a position to charge higher price for a commodity. The elasticity of demand is the basis of demand forecasting the knowledge of income elasticity is essential for demand forecasting of producible goods in future long- term production planning and management depend more on the income elasticity because management can know the effect of changing income levels on the demand for his product. Importance of elasticity of demand 1 price discrimination if the demand for a product has different elasticities in different markets, then the monopolist can fix different prices in different markets.