Question

Define

• Elasticity
• Price Elasticity of Demand
• Total Revenue

What is the difference between Inelastic and Elastic?

What determines whether the demand curve is Inelastic or Elastic?

Answer 1

1) a) Elasticity is defined as the change in behavior of sellers and buyers in response to a change in price for a product or service.

b) Price elasticity of demand is defined as the measurement of how responsive to changes in price the quantity demanded of a good is. The consumption of goods with relatively elastic demand is fairly responsive to changes in price, and the consumption of goods with relatively inelastic demand is not very responsive to changes in price

c) Total revenue is defined as the total receipts a seller receives from selling a given quantity of products or services to buyers

2) When the demand for product is inelastic then a change in prices causes no change in its demand; on contrary when price change causes more than proportionate change in demand, it is elastic

3) Inelastic demand curve: When a higher change in price brings about lesser than proportionate change in demand, it is known as inelastic demand. The demand curve is steeper. Necessary items can be have inelastic demand. The coefficient of elasticity of demand is less than 1, that means ed < 1.

Elastic demand curve: When a small change in price brings about more than proportionate change in demand, it is known as the elastic demand. The demand curve is flatter.
Luxuries and comforts have elastic demand. The coefficient of elasticity of demand is greater than 1, that means ed > 1.