mathkid3 said:hi,
Thanks for your help here. I am only in an Elementary Calculus 1 class and where I am sure your answer is correct...they have not introduced us to the formula you use.
What they have done is give us the following formula and I wanted to ask if you could respond again, taking this basic elementary formula and stating it again in a way I could proceed?
N = (p/x)/(dp/dx) They state this is
Formula for price
elasticity of demand
Thank you sir!
Elasticity in economics refers to the measure of how responsive the demand or supply of a product is to changes in its price. It is a crucial concept in understanding how consumers and producers behave in the market and how prices affect the quantity of goods bought and sold.
Elasticity is calculated by dividing the percentage change in the quantity demanded or supplied by the percentage change in the price. The formula for price elasticity of demand is (ΔQ/ΔP) x (P/Q), where ΔQ is the change in quantity, ΔP is the change in price, P is the original price, and Q is the original quantity. A higher value indicates a more elastic demand or supply, while a lower value indicates a more inelastic demand or supply.
The different types of elasticity include price elasticity of demand, price elasticity of supply, income elasticity of demand, and cross-price elasticity of demand. Price elasticity of demand measures the responsiveness of quantity demanded to changes in price, while price elasticity of supply measures the responsiveness of quantity supplied to changes in price. Income elasticity of demand measures the sensitivity of demand to changes in income, and cross-price elasticity of demand measures the responsiveness of demand for one product to changes in the price of another related product.
The value of elasticity can be interpreted as the degree of sensitivity of quantity to price changes. A value greater than 1 indicates a relatively elastic demand or supply, meaning that a small change in price leads to a significant change in the quantity demanded or supplied. A value less than 1 indicates a relatively inelastic demand or supply, meaning that a change in price has a small effect on the quantity demanded or supplied. A value of 1 indicates unit elasticity, where the percentage change in quantity equals the percentage change in price.
Elasticity can be used to analyze revenue function by determining the optimal price and quantity combination that maximizes revenue. A firm can calculate the price elasticity of demand for its product and use this information to adjust prices accordingly. If the demand is relatively elastic, a decrease in price could lead to an increase in revenue, while an increase in price could lead to a decrease in revenue. On the other hand, if the demand is relatively inelastic, a decrease in price could lead to a decrease in revenue, while an increase in price could lead to an increase in revenue. By considering elasticity, a firm can make informed decisions to optimize its revenue function.