What is the role of elasticity in microeconomics?
Elasticity in microeconomics is a way to express how to change the price of the goods will affect the amount of this good that consumers will require on the market. Economists consider good elastic, if its price is expressed as a percentage, greater than a change in the number of good consumers will also require this price, also expressed as a percentage. Knowledge of the elasticity of good plays a useful role in estimating the impact of price changes for a given good price changes. In economics, the demand for good is expressed as a chart called the Curve of Demand, which represents the amount of a given good that consumers will require at all costs. Changing the demand for good, in the vocabulary of the economy, means changing the required amount at all costs level. Elasticity in microeconomic measurement measures changes in the required amount or movement along the demand curve instead of shifting in the demand curve itself.
If there is a demand forDobru highly elastic, it means that companies can significantly change the required amount of this good with a small price change. The elasticity of demand for good, calculated as a percentage change in price for a percentage change in required amount, works on a description of both the increasing required quantity and the decreasing amount. For example, if the good flexibility of demand is very elastic, then a small increase in price will cause a large decrease in the amount of desired good. A similarly small drop in price of the item will cause a large increase in the amount required for this good.
When the demand for good is inflexible, companies can change the price of the item with Little Change in the amount required from this item. This means that companies can increase the price of the item without causing a significant reduction in the required amount. However, this also means that if a company reduced the price of an item whose demand was inflexible, the amount required for this item would not increase significantly.
elasticity in microeksOnomii provides companies that control their prices decisions. If sales are lagging behind the good with high flexibility of demand, the company can reduce the price and increase the amount required for this good to make sales again profitable. Alternatively, if the company loses money for good, the flexibility of the demand is very low, knows that the price reduction will not increase sales; Reduction of prices would only exaggerate the loss of society. In this situation, the elasticity of the demand may tell the company that to increase sales will have to change something about the nature of the product itself if you move the entire demand curve for good upwards rather than just reduce the price of the goods.