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Elasticity

            Less Developed Countries (LDC's) can be defined as countries that have low levels of GDP and income per head. These countries usually have a heavy dependence on the primary sector of the economy. The price elasticity of demand and the price elasticity of supply are highly important factors for producers of primary commodities in less developed countries.
             Price elasticity of demand is important to producers of primary commodities because these commodities often exhibit a downward trend over time and are prone to fluctuations. Many commodities are necessities and have a low income elasticity of demand. As a result when consuming nations experience increases in their incomes, their demand for commodities grows but at a proportionately smaller rate when compared with demand for goods which have a high income elasticity of demand (technology). Fluctuations in the market prices which affect demand for primary commodities are mainly due to changes in exchange rates and changes in foreign government protectionist measures.
             Price elasticity of supply is also important to producers of primary commodities. As most primary commodities are agricultural, it is not easy for producers to make more in the short term if there is an increase in demand, this makes supply relatively inelastic. In the long term however it is possible for excess factors of production to be put to work. Due to the largely agricultural nature of primary commodities producer substitutes are difficult to make in the short term. For example if a farmer has planted and harvested potatoes and there is a large increase in the price of carrots he or she is unable to produce carrots in a short amount of time and must wait for the following season.
             In conclusion it may be said that the price elasticity of demand and the price elasticity of supply are highly important factors for producers of primary commodities in less developed countries.


Essays Related to Elasticity

1. Price Elasticity

Importance of Determining Price Elasticity "Price elasticity is important in business to determine in a given market whether an increase (or decrease) in prices will generate an increase (or decrease) in revenues" (Elasticity coefficients, n.d.). "Elasticity of demand calculations reflect "the percentage change in quantity demanded per 1percent increase in price" (Hall, 2001, p.92). ... Calculating the Elasticity coefficient (E) The formula for calculating the elasticity co-efficient is as follows: ( %change in y ) ( %change in x ). ... If x is income then the number becomes the inc...

  • Word Count: 652
  • Approx Pages: 3
  • Has Bibliography
  • Grade Level: High School

2. Elasticity Analysis - Supply and Demand

Elasticity Analysis The first task given by the supervisor is to calculate the elasticities of each independent variable that is present in the model. ... The partial derivative for model 1 are shown as Price elasticity of demand = ΔQ/δP = -42 + 20X Competitor's price elasticity of demand = ΔQ/δX = 20P Income elasticity of demand = ΔQ/δI = 5.2 Advertising elasticity of demand =ΔQ/δA = 0.2 Microwave elasticity of demand = ΔQ/δM = 25 The same process can be carried out for model two can be shown in the following manner ΔQ/δP = -100 + 25X ΔQ/δA = 15 ΔQ/δX = 25P ΔQ/δI = ...

  • Word Count: 1584
  • Approx Pages: 6
  • Has Bibliography
  • Grade Level: High School

3. Tradeoffs and Price Elasticity of Demand

(Mankiw, 2012) Different elasticities of demand measures the responsiveness of quantity demanded to changes in variables which affect demand so: Price elasticity of demand: "measures the responsiveness of quantity demanded by changes in the price of the good." Income elasticity of demand: "measures the responsiveness of quantity demanded by changes in consumer incomes." ... That is, Price elasticity of demand = % change in quantity demanded % change in price The following formula expresses the midpoint method of calculating the price elasticity of demand between two points denoted (q...

  • Word Count: 1354
  • Approx Pages: 5
  • Has Bibliography

4. Ecomomics: Elasticity

1) Define the term price elasticity of demand and describe the three (3) price elasticity ranges. Describe the relationship between the price elasticity of demand and total revenues of a firm. ... In other words, price elasticity of demand is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. ... There are three types of price elasticity ranges. ... Goods have an elastic demand only when the price elasticity of demand is great than one. ...

  • Word Count: 2802
  • Approx Pages: 11

5. Microeconomics: Land, Labor, Capital, and Entrepreneurship

The principles of elasticity are applied widely in the discipline of economics. ... The word elasticity suggests responsiveness or consciousness in daily language. ... Economics specialists describe the elasticity coefficient so that: First, if the elasticity demanded is greater than one (ED >1), then demand is elastic. Also, if the elasticity demand equals one (ED = 1), then demand is unit elastic. ... It is believed that price elasticity for remedial services is between 0 and -1. ...

  • Word Count: 1076
  • Approx Pages: 4
  • Has Bibliography
  • Grade Level: Undergraduate

6. Market Supply and Demand

In a market demand consumers is an important factor that contributes to the changes of the elasticity of demand. ... Price elasticity can be classified into 3 types which is elasticity, inelastic, unit elastic. ... (Lipsey, Chrystal, 2010) For example 10% fall of price, increases the quantity demanded to 20%, price elasticity would be = 2. ... (Lipsey, Chrystal, 2010) For example 20% increase in price, will lead to a fall of 5% in quantity demanded, price elasticity would be = 0.25 (www.tutor2u.net) Lastly, unit elastic means if a proportionate change in price leads to an equal change in qua...

  • Word Count: 886
  • Approx Pages: 4
  • Has Bibliography

7. Micro Economics

1)Elasticity is the measure of response of a consumer to the change of the price of an item. Elasticity is determined by five different factors. ... There are four different types of elasticity. The first is the elasticity of demand or price elasticity. ... Income elasticity has two parts to it. ...

  • Word Count: 864
  • Approx Pages: 3

8. Southwest AIrlines

Another building block concerning the elasticity of demand for the industry must also be addressed. ... The overall elasticity decreases when the business customers are added to the equation. ... This whole idea of elasticity of demand is very important because it leads to the aforementioned "cutthroat competition" situation. ... Because of the elasticity of the industry, "cutthroat competition" can, and does, become a significant obstacle to overcome. ... In this way, the presence of substitutes adds to the elasticity of the airline industry. ...

  • Word Count: 1371
  • Approx Pages: 5
  • Grade Level: Undergraduate

9. Effects of taxing Internet commerce

Finally, it discusses the elasticity of the tax on Internet commerce. My essay will utilize the following economic principles: supply and demand, tax incidence, deadweight loss of taxation, tax distortions and elasticities. ... Section three will consider how the elasticity of demand affects the size of the deadweight loss. ... But since luxury items tend to have elastic demands, will the elasticity of demand have a significant effect on the deadweight loss? ... Figure 3: Inelastic Demand Figure 4: Elastic Demand The two figures above show how the elasticity of demand affec...

  • Word Count: 1028
  • Approx Pages: 4
  • Grade Level: High School

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