Economics attrivutes of consumer and firms
3 important questions on Economics attrivutes of consumer and firms
Price Elasticity of demand
Unitary price elastic
Prices elastic
Price inelastic
perfect price inelastic
Edp = - 1 Unitary price inelastic
(P increases 10 %, D decreases 10%)
Edp < -1 price elastic
(P increases 10%, D decreased more than 10% )
Edp > -1 price inelastic
(P increases 10 %. D decreases less than 10 %)
Edp = 0 perfect price inelastic
(P increases 10 %, D stays the same )
(P increases 10 %, D decreases 10%)
Edp < -1 price elastic
(P increases 10%, D decreased more than 10% )
Edp > -1 price inelastic
(P increases 10 %. D decreases less than 10 %)
Edp = 0 perfect price inelastic
(P increases 10 %, D stays the same )
Cross price elasticity of demand
•What effect does the change in price for one product have on demand for another product?
–Em,n > 0 Price n increases, demand m increases = substitutes
–Em,n < 0 Price n increases, demand m decreases = complements
–Em,n = 0 Price n increases, no effect on demand m = non- related products
Hotel industry: different rates depending on
High season – low season
Normal days – holidays
Weekdays – weekends
Normal days – holidays
Weekdays – weekends
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