photo credit : People consume goods and services to satisfy their needs and wants. Needs are the basic requirements or necessities to be fulfilled by people for their survival or living. For example people need food, shelter water and clothes .They cannot live with out fulfilling these needs Needs are common to all human and do not vary with ...
The Law of demand explains the negative or inverse relationship between price and quantity.Therefore, the demand curve shows negative slope and its downward sloping.We can explain above using three concepts1. Substitution Effect -When the price of a product rises people tend to buy alternative product which they can get smiler utility. For example when the price of butter is expensive ...
Demand EquationDemand equation can be written as , Qd= a- bP a- is the point that represent the value for Qd (quantity) when P (Price) = 0. b - ∆Qd/ ∆P Slope of the Demand curve The slope of the any straight line curve can be found by the following formula vertical difference ( change)Slope of a curve = ...
Price Quantity Point on Demand curve10 400 D20 300 C30 200 B40 100 ALet’s calculate the elasticity using the above data. Lets consider point B and see the elasticity when the price is increasing ( moving from point B to A) ∆Q P (Ep) = ---- x ------ ∆P Q∆Q- Change in quantity ∆P –Change in priceP - the ...
Image courtesy-Aurochs BlogThe Law of demand explain the negative or inverse relationship exists between the the two variables, price and quantity. ( cetaris paribus). Or in other words as price rise quantity demanded falls and as price falls quantity demanded rises.How ever we can find exceptions for this negative relationship that shows positive relationship between price and quantity. They are1. ...
Step 1 - Draw the two axis and name the axis. ( Eg:- P and Qd) Step 2- Mark the scale on the axis and give values. This is done according to the data (values we have for price and the quantity). Eg. If the values ranging from 0 to 2000. You have to mark scale to cover these values.Step ...
There are 5 types of price elasticity of demand.1. Perfectly elastic demand / infinity elasticity -value of elasticity goes to ∞( Ep=∞)2. Elastic demand- value of elasticity is greater than 1 ( (Ep>1) 3. Unit elastic demand - value of elasticity is equal to 1 ( Ep=1)4. Inelastic demand - value of elasticity is less than 1 ( Ep<1)5. Totally ...
