Price elasticity essays

The approximations of elasticity on the income level are in-between 0 and 0.2. The optimistic signal of the elasticity standard suggests that as income level rises, the demand side will also experience a rise. The scale, though, proposes that the demand side reaction is moderately little.

“The elasticity of demand at any price… is the proportional change of amount purchased in response to a small change in price, divided by the proportional change of price.” Thus, price elasticity of demand is the ratio of percentage change in amount demanded to a percentage change in price.

The producer will increase the price to earn more profit because when the price of an inelastic good increase, the percentage of quantity change will not be as much as the percentage changes in price. For example, a cigarette business will increase the price of cigarette to gain higher profit. However, the quantity demanded will not increase much.

Another research suggested that the healthcare associations with prices are elastic. Its outcome suggests that the elasticity of healthcare and price are at -2.3 diagonally 0.65 to 0.95 tier of the allocation of expenditure, with a spot-wise 95precent assurance space at the 0.80 tier of -02.5 to -02.0.