The elasticity of demand employee is a key concept in economics which quantifies how much change one variable against another. So today will be explained what is the elasticity of demand, And what it is.
The elasticity in the economy is a very useful tool that lets you know how sensitive is the change of a property over another and applied in various areas, levels of demand, supply, income, etc … Elasticity is a concept that to understand a variety of economic phenomena as marginal consumption and marginal utility, the effect of taxes and its tax impact, among many concepts.
In general, it says that a variable is elastic if your answer is very great in a relatively small change and vice versa. It is said that a variable is inelastic if your relative is little change although the dependent variable change greatly. On the other hand, one can speak of a positive relationship, in which the rise of a variable generated increases in the other, or a negative relationship, in which the rise of a variable generates a decrease in the other.
Going into concrete form and give a few examples of what is the elasticity of demand You can talk about price elasticity of demand. This concept is a relationship that tells us how much change the demand for a product as its price.
It is expected that if the price falls the demand rises, and is the task of an economist to find an ideal point where the utility company for the maximum possible. To achieve this, it is useful to graph the changes, create a mathematical model and under this you can find the ideal point.
Finally, to give an example: it is said that water is a negative relationship inelastic product, no matter how much water price increase, because it is a must for life, demand will drop very little.
This is just one example, and should keep in mind that this interaction between two variables can give much useful information for companies, and sometimes for consumers.
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