Supply And Demand Essay

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Finally, for cross price elasticity, this helps to provide information on market conditions and the relationships of goods.

However, there is a similarity between these concepts as how the magnitude of elasticity is measured for the three concepts of elasticity of demand.

[12 marks] Chapter: Elasticity of Demand and Supply Examine three elasticity of demand concepts, namely price elasticity of demand (PED), income elasticity of demand (YED) and cross elasticity of demand (XED).

By understanding these concepts, it will be more effective in understanding the price strategies used by producers to raise total revenue.

These different concepts can be distinguished from several perspectives as will be seen in this essay.

One differing factor would be the implications of the coefficient of the respective types of elasticity of demand.

For positive elasticity, this would refer to a giffen good for price elasticity, normal good for income elasticity and a substitute good for cross price elasticity.

Another differential would be the factors affecting the value of elasticity of demand.

Elasticity of demand is the measurement of the responsiveness of the change in quantity demanded due to the change in a variable influencing it.

These variables are different for all three types of elasticity – The price of the good for price elasticity of demand (PED); the income of the consumer for income elasticity of demand (YED); the price of other goods for cross elasticity of demand (XED).


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