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Essay / Research Paper Abstract
This 5 page paper begins with an explanation of price elasticity of demand, price elasticity of supply and price elasticity of income, including formulas and examples. The writer then discusses the price elasticity of demand of VCRs, including data regarding sales in the late 1980s and the declining sales in recent years. Bibliography lists 5 sources.
Page Count:
5 pages (~225 words per page)
File: MM12_PGelsvc.rtf
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Unformatted sample text from the term paper:
demand decreases (Kaplan, 2002). This is known as the price elasticity of demand (Kaplan, 2002). Price elasticity differs according to the necessity of the product, for instance, oil products
are more necessary than eating out so oil products are not as sensitive to price changes as are restaurant prices. Consumers continue to buy oil products even when the price
escalates because they are essential. There are some goods consumers are not willing to give up consumers are not able to stop using because the price increases (Kaplan, 2002). Oil
is one of those types of products. In other cases, there are other goods that will substitute for the good whose price has increased (Kaplan, 2002). Back to the restaurant
example, fast-food restaurants could be a substitute for fine dining restaurants, albeit a poor substitution. A product is referred to as highly elastic if a small change in the
price significantly changes the quantity demanded or supplied (Investopedia, 2004). A product is referred to as inelastic when a change in price results in no or minimal changes in the
quantity supplied or demanded (Investopedia, 2004). Elasticity can be determined by using this equation: Elasticity = (% change in quantity / % change in price) (Investopedia, 2004; Kaplan, 2002). "If
elasticity is greater than or equal to 1, the curve is considered to be elastic. If it is less than 1, the curve is said to be inelastic" (Investopedia, 2004).
One of the three primary factors affecting the demands price elasticity is income (Investopedia, 2004). Income, in this instance, refers to the total amount a consumer can spend on a
particular product (Investopedia, 2004). A simple example: hypothetically, if a consumer has $3.00 allocated to spend on cups of coffee each day and the price increases from $1.50 to $3.00
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