The point of this essay is to clarify and point up the different concepts of elasticity of demand passing through examples and diagrams.
The point of this essay is to clarify and point up the different concepts of elasticity of demand passing through examples and diagrams. In every market economy, when the price of a good rises the quantity demanded will fall and vise versa. Conversely, in most cases this is not enough. We would also like to know how much will the quantity demanded rise or fall. In other words, we will want to know how responsive demand is to a rise in price. This responsiveness of quantity demanded to a change in price is what we call price elasticity of demand. Therefore, what we want to compare is the size of the change in quantity demanded with the size in the change in price. Because of the different units that price and quantity are measured in, the only approach we can do this is to use percentage or proportionate changes. From this derives the "formula of the price elasticity of demand (PED)" for a product, which is the percentage (or proportionate) change in quantity demanded divided by the percentage (or proportionate) change in price. Putting this formula in symbols we have: PED= %?QD %?P Where E is the Greek E and is the symbol we use for elasticity and ? is the capital Greek delta and is the symbol we use for a "change in". As it was mentioned before, elasticity of demand is measured in proportionate or percentage terms. This happens for three different reasons. To begin
'Real GNP inevitably remains the most commonly used measure of economic activity. Although far from ideal, it is the best measure we have' Explain and discuss.
'Real GNP inevitably remains the most commonly used measure of economic activity. Although far from ideal, it is the best measure we have' Explain and discuss. Gross National Product is a basic measure of national economic health. Governments and businesses use it to make important decisions. GNP is defined to be the total value of all final goods and services produced in an economy in a year. GNP is a measure of one thing- market economic activity, however it can be interpreted in different ways and used for different purposes. GNP is a measure of production; if a can of beans is bought for £1, it enters the GNP, and it is in indication that the economy has produced an extra £1 of output. GNP is also a measure of the additional value that our efforts have produced. An example is in the production of a loaf of bread. There are many people involved such as the farmer, miller, baker etc. Each adds value to the raw material that they started with. The total for GNP also includes the total amount of value added that has been produced, at all stages of production, in the economy in a year. Finally GNP is a comprehensive measure of national income. £1 spent on a loaf of bread will be entirely spent on providing income for the farmer, miller and baker. Every pound of spending is translated into a pound of wages, rent or profits. There is nothing left over. The