Copyright © Philip M. Parker, INSEAD. Terms of Use.
| Domain | Definition |
Agriculture | The relationship between the change in the price of a commodity and the corresponding change in the quantity that is sold. If a small change in the price is accompanied by a relatively large change in the quantity sold, demand is said to be elastic (responsive to price changes). But if a large change in the price is accompanied by a small change in the quantity sold, demand is said to be inelastic. The demand for many farm products is relatively price inelastic. As a result of low price elasticity of demand, shifts in supply can have large impacts on prices. For example, the presence of surpluses results in disproportionately large price declines, and conversely shortages result in large price increases. For these reasons, agriculture often is described as an inherently unstable industry. (references) |
Source: compiled by the editor from various references; see credits. | |
(From Wikipedia, the free Encyclopedia)
It is measured as the percentage change in demand that occurs in response to a percentage change in price. For example, if, in reponse to a 10% fall in the price of a good, the quantity demanded increases by 20%, the price elasticity of demand would be 20%/-10% = -2.
In general, a fall in the price of a good would be expected to increase the demand, so we would expect the price elasticity of demand to be negative as above. Note that in the economics literature the minus sign is often omitted.
It may be possible that demand for a good rises as its price rises, even under conventional economic assumptions of consumer rationality. Two such classes of goods are known as Giffen goods or Veblen goods.
Various research methods are used to calculate price elasticity:
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Source: adapted by the editor from Wikipedia, the free encyclopedia under a copyleft GNU Free Documentation License (GFDL) from the article "Price elasticity of demand."
| The following statistics estimate the number of searches per day across the major English-language search engines as identified by various trade publications. Hyperlinks lead to commercial use of the expression at Amazon.com. |
| Expression | Frequency per Day |
price elasticity of demand | 23 |
| Source: compiled by the editor from various references; see credits. | |
Hexadecimal (or equivalents, 770AD-1900s) (references)50 52 49 43 45 45 4C 41 53 54 49 43 49 54 59 4F 46 44 45 4D 41 4E 44 |
| Leonardo da Vinci (1452-1519; backwards) (references)
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Binary Code (1918-1938, probably earlier) (references)01010000 01010010 01001001 01000011 01000101 00100000 01000101 01001100 01000001 01010011 01010100 01001001 01000011 01001001 01010100 01011001 00100000 01001111 01000110 00100000 01000100 01000101 01001101 01000001 01001110 01000100 |
HTML Code (1990) (references)P R I C E   E L A S T I C I T Y   O F   D E M A N D |
ISO 10646 (1991-1993) (references)0050 0052 0049 0043 0045 0045 004C 0041 0053 0054 0049 0043 0049 0054 0059 004F 0046 0044 0045 004D 0041 004E 0044 |
Encryption (beginner's substitution cypher): (references)5052433739239463553544337435459249402383947354838 |
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Copyright © Philip M. Parker, INSEAD. Terms of Use.
