price elasticity of demand
This essay seeks to demonstrate my understanding of the economic concept of elasticity of demand. I intend to examine two fundamental concepts, supply and demand and in doing so this essay will look at defining and discussing income and cross price elasticity, consider the significant changes of elasticity overtime by using numerical examples and graphs, and finally apply this theory to the construction industry. First and foremost, the theory of supply and demand is one of the essential theories of economics. Supply is the amount of product that a producer is willing and able to pay at a particular price, whereas demand is the amount of product that a buyer is willing and able to buy at a specific price. The model for supply and demand shows the relationship between a product's accessibility and the interest shown in it. Below is a graph demonstrating this: Price elasticity of demand measures the responsiveness of demand to changes in price. It involves comparing the proportional changes in the price with the proportional changes in the quantity demanded. Economists express the relationship between the percentage changes in price and demand in the form of a ratio or coefficient. This is called the price elasticity of demand (PED) and is demonstrated below: PED = % Change In Quantity Demanded % Change In Price It is said that when the demand elasticity is high it