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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. Elasticity Analysis - Supply and Demand

... can be shown in the following manner ΔQ/δP = -100 + 25X ΔQ/δA = 15 ΔQ/δX = 25P ΔQ/δI = 10 Implications of Elasticity The elasticity is the change in quantity demanded based on the change in price that takes place. In regards to the models given, the independent variables would be ... the people, quantity would rise by 5.2 units. The next independent variable analyzed is A which represents the monthly advertising expenditure of the company. The elasticity becomes the partial derivative of ΔQ/δA and it shows that for every unit change in advertising, the value of quantity rises ...

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2. Ecomomics: Elasticity

... a change in its price. As well, it gives the percentage change in quantity demanded in response to a one percent change in price. Price elasticity's are almost always negative, although at times accountants tend to ignore the sign even though this can lead to uncertainty. Only goods which do not ... greater than one, in absolute value. Changes in price have a relatively large effect on the quantity of a good demanded. To calculate the price elasticity of demand, you have to first calculate percent changes in quantity demanded and price. First you have to divide the change in price by the ...

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3. Price Elasticity

... portfolio assignment analyzes the price reduction from both perspectives, that of the Marketing department and the GM to make a recommendation as to strategy. 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 ... Price and revenues move in the same direction An increase (decrease) in prices generates an opposite smaller change in quantity demanded (in percentage terms) Therefore, revenues increase (decrease) (Elasticity coeffic...

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4. Tradeoffs and Price Elasticity of Demand

... pick studying over friends then you miss out of the fun you'll be having with them. If you pick friends then you might score less in your finals. Issue 2. Elasticity is a measure of just how much the quantity demanded will be affected by a change in price or income or change in price of related goods.(Mankiw, 2012) Different elasticities of ... to tobacco products as well and consumption goes down when price increases but because of addictive nature of tobacco products, tobacco demand is not very sensitive to price changes.Price elasticity is between 0 and -1 (its absolute value is smal...

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5. Assessing the Impact of Lower gas prices in Alterative Fuel Vehicles and the Consumption of Alternative Fuels

... gasoline on a global basis throughout the 21rst century, the traditional interrelationships between demand and pricing have become completely disengaged from each other. There is in fact no clear definition of elasticity of demand for fuels, as the effects of oil futures trading, OPEC pricing models and decisions, the inclusionary versus exclusionary strategies of OPEC with regard to their lesser capitalized members ... has cost oil companies their credibility. With a lack of trust in the supply chain, distribution system, and pricing strategies of the oil industries, consumers are no lo...

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

... is between 0 and -1. This indicates that if prices rise by 10%, the demand declines. Hence medical goods are inelastic. Income elasticity models the percentage variation in the demand for medical services as revenue increases (Research.omicsgroup.org, 2016). If the income elasticity is higher than 1, medical services are a lavishness commodity. This signifies that as persons get wealthier, they require more of the ... and single prints remaining temporary. A cost rise in percentage points to a drop in the distribution with the percentage difference in the community of the publishing com...

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7. Micro Economics

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8. Market Supply and Demand

... demand that refers to when the price of the goods decreases, then the quantity demanded for the goods will increase or vise versa. ( N. Gregory Mankiw, 2010) The definition of price elasticity of demand is the responsiveness of proportionate changes in quantity demanded to proportionate changes in price. In other words, the percentage change in quantity demanded divided by the percentage change ... shift to right that decreases the price of the rice as the firms would like to supply more during the inflation to produce most profit. ( Robert, Marc, 2009) The price elasticity of demand ca...

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9. How Sound Are The Foundations Of The Aggregate Production Function?

... that the estimated parameters of the production function are merely capturing an underlying accounting identity. Hence, no reliance can be placed on estimates of, for example, the elasticity of substitution as reflecting technological parameters. The argument also explains why good statistical fits of the aggregate production functions are obtained, notwithstanding the difficulties posed by the aggregation problem ... , equation (2) may be written as: (5) or as: (6) A comparison with the income identity, namely, Vi k wLi + rJi , shows that w = ' or w = a = '. A similar relation...

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