Answer to Question #261586 in Management for jean

Question

When we say elasticity of demand and supply, what is the first thing that comes to your mind? Explain your answer.

Answer 1

Both the demand and supply curve show the relationship between price and the number of units demanded or supplied. Price elasticity is the ratio between the percentage change in the quantity demanded (Qd) or supplied (Qs) and the corresponding percent change in price.Supply and demand is an economic model of price determination in a market. ... If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity. If supply decreases and demand remains unchanged, then it leads to higher equilibrium price and lower quantity.An elastic demand is one in which the change in quantity demanded due to a change in price is large. ... If the formula creates an absolute value greater than 1, the demand is elastic. In other words, quantity changes faster than price. If the value is less than 1, demand is inelastic.