Unit 2 Discussion 1 Price Elasticity of Demand [[NEW]]

Unit 2 Discussion 1 Price Elasticity of Demand [[NEW]]
Download here
Unit 2 Discussion 1 Price Elasticity of Demand [[NEW]] It is highly recommended that you review the Seminar
presentation located in the Seminar area before beginning the Discussion. The law of demand states that a fall in the
price of a product raises the quantity demanded for the product, whereas an increase in price leads to a decrease in
quantity demanded for the product. The price elasticity of demand measures the extent of the responsiveness of the
quantity demanded to a change in price. Demand for a product is elastic if the quantity demanded responds substantially
to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in
price. Demand is inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that
the percentage in price is greater than the percentage in quantity demanded for a certain product. However, the extent
of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in
the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number
of substitutes are available, consumers respond to a higher price of a product by buying more of the substitute the
product and less of the relatively more expensive product. In addition, goods or services that are considered necessities
tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more
elastic (less inelastic) demand. Explain why the demand for the good or service provided by a firm is elastic or inelastic.
How does the elastic or inelastic demand influence pricing decisions by the firm to maximize profit? What are the
impacts of elastic demand and inelastic demand on total revenue? Provide examples on how the availability of close
substitutes affects price elasticity of demand for a good or service. Give specific examples of necessities or luxuries,
and explain how they affect price elasticity of goods or services.
Page 1/{nb}