a solvent Demand expresses the desire of consumers to buy products at a certain price.At the heart of this desire is the concept of marginal utility of goods (an increase in the utility consumption of each unit of goods purchased).On the demand directly affects consumers' purchasing power.At different price levels, consumers can purchase different amounts of goods.The higher rates, while maintaining all other conditions, the lower the demand and vice versa.
elasticity of demand reflects the degree of sensitivity of the demand for goods to changes in various factors (price, income people, etc.).If demand for the product is highly dependent on changes in, for example, the price for it, it is called elastic if the price does not affect the demand, it is called inelastic.
There are types of elasticity of demand:
1. The elasticity of the price.The coefficient of this indicator is calculated as the ratio of the percentage change in demand for the percentage change in the price.If you change the price demand can be elastic, inelastic or have a single indicator.
This elasticity depends on the need of the goods, quantity of goods, deputies and the time factor.
2. Income elasticity.The coefficient is the ratio of the change in demand to a change (increase or decrease) in the percentage of income buyers.It shows how much the volume of demand for the goods when changing consumer income by 1%.The ratio may be positive or negative.
Depending on the effect of changes in income on demand, distinguish such groups of goods: the highest category (quality products) - demand is growing in proportion to revenue growth;the lowest category (cheap low-quality goods) - on the contrary;essential goods (their consumption is essentially independent of changes in income).
3. Cross-elasticity of demand.Ratio indicator is the ratio of changes in demand for the commodity type of a (X) to a change in demand for the goods of another type (Y).If the ratio is greater than one, the products are interchangeable, if less, then they complementary;if equal to zero, then the conjugate products.
on the elasticity of demand affects a number of factors:
- time factor.If you have time to make purchasing decisions on product demand becomes more elastic.
- replaceable.If a product has quality substitutes, the elasticity of demand for it will always be high.For example, the demand for insulin would never be elastic, regardless of the price for it, because the medicine is vital for people with diabetes.
- share that expenditure takes shoppers goods.The larger it is, the more elastic is the demand.With a uniform price increase consumer refuses to buy more car than stationery.Because pens are purchased more frequently.
- Advertising and Marketing.The more recognizable product thanks to good advertising, packaging and other features, the more tolerant attitude toward it, and the consumer is less elastic demand.
- Luxury or basic necessities.In the first group of commodities (gold, jewelry, expensive cars), the demand is always more elastic than the second (food, household chemicals).
- personal preferences and tastes of consumers also significantly affect the degree of which is the elasticity of demand.
Point elasticity of demand - is the value measured at a single point of the demand curve, which is constant along the entire line.It is a measure of sensitivity to changes in the demand of any other indicators.
Thus, the elasticity of demand - the reaction of the indicator to change the sentence or other relevant factors.Measured coefficient of elasticity.
