Answer to Question #193547 in Microeconomics for Ain Amira

Question

what are an appropriate measure of how sensitive the quantity demanded is to changes in price, income and price of goods? what affects those sensitivities? (10 marks)

Answer 1

The Elasticity of demand is the economic factor which measure the sensitivity of the change in price, income, goods in other variables. That is, to change the price instead of demand or supply or to change the demand for change in the income.

The Demand elasticity has many factors as price level, income level, goods or services, availability of substitutes. The availability of alternative of goods affect the elasticity of demand. The price elasticity of demand is calculated by the percentage change in quantity demanded divided by the percentage change in price level.

For instance, the demand for chocolates is elastic, if the price of one chocolate increase consumers will by the alternate products in case of sensitivity of money.