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Essay / Research Paper Abstract
This 12 page paper examines the concept of price elasticity and the variables the may impact on the demand function. The paper starts with a review of the theory and then gives a practical demonstration using a fictitious survey and one inelastic product and one elastic product. The bibliography cites 6 sources.
Page Count:
12 pages (~225 words per page)
File: TS14_TEpriceela.rtf
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Unformatted sample text from the term paper:
supply is not able to satisfy the demand the price will increase until the demand drops or more suppliers enter the market attracted by the high prices. Where supply is
in excess of demand the opposite will happen , the price will drop until sufficient demand is created by the lower prices, or sufficient supplies drop out of the market
to reduce the supply. This an be shown in a supply and demand graph. Elasticity of price tells us the rate at which the price paid on the
demand line will change at. Goods that are needed, such as utilities and basic food supplies will need to be bought even if prices increase dramatically, this means the demand
curve will be less steep, meaning that the demand will fall of slowly. Where the goods are luxury goods and not essential, for example, chocolate or champagne, then the demand
curve may be steeper as the demand will drop off more rapidly as the price increases. By understanding the elasticity forecasts can be made, this may help to maximise the
profits of a company if looking to change the price and the level of change may be estimated to allow better business decision to be made. The calculation loos simple,
but there are many influences that need to be understood. However, there are many influences on the elasticity of good, in excess of simply the price, but these reflect
in the way price is interpreted when it changes. In asking individual how they behave when a price changes there will be other consideration taking place when they answer the
question. Other impact may include the influence of substitute products, the price of complimentary goods, the level of advertising, disposable income and fashion trends. The influence
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