The price elasticity of demand of a product reflects the change in the quantity demanded as a result of a change in price.Factors Affecting Price Elasticity of Demand: Relative Need for the Product, Availability of Substitute Goods, Impact of Income, Time under Consideration, Perishability of the Product, Addiction.
The extent of responsiveness of demand with change in the price does not remain the same under every situation. The demand for a product can be elastic or inelastic, depending on the rate of change in the demand with respect to change in price of a product. Based on the rate of change, the price elasticity of demand is grouped into five types.
Price elasticity of demand is a measure of a change in the quantity demanded of a product due to change in the price of the product in the market. It can also be defined as the ratio of the percentage change in quantity demanded to the percentage change in price.
In economics, the elasticity of demand is a degree of change in the quantity demanded of a product in response to its determinants, such as the price of the product, price of substitutes, and income of consumers. There are three types of elasticity of demand: 1. price, 2. Income, 3. Cross elasticity of demand
Market power define as the ability of an organisation to raise the market price of a good or service over marginal cost to achieve profits. It can also be defined as the degree of control an organisation has over the price and output of a product in the market. A firm with total market power is in a position to raise the prices without any loss of customers.
Market structure can be defined as a group of industries characterised by number of buyers and sellers in the market, level and type of competition, degree of differentiation in products and entry and exit of organisations from the market. The study of market structure helps organisations in understanding the functioning of different firms under different circumstances.
In economics, Market failure occurs when there is an imbalance in the quantity of a product demanded and supplied, which leads to an inefficient allocation of resources. These failures can occur due to a variety of reasons, such as the existence of externalities, public goods and incomplete information.
Revenue is the total amount of money received by an organisation in return of the goods sold or services provided during a given time period. In other words, revenue of a firm refers to the amount received by the firm from the sale of a given quantity of a commodity in the market.
Long run cost refers to the time period in which all factors of production are variable. Long-run costs are incurred by a firm when production levels change over time. In the long run, the factors of production may be utilised in changing proportions to produce a higher level of output. In such a case, the firm may not only hire more workers, but also expand its plant size, or set up a new plant to produce the desired output.
Economies of scale refer, as a firm expands its production capacity, the efficiency of production also increases. It is able to draw more output per unit of input, leading to low average total costs. Diseconomies of scale refer to the disadvantages that arise due to the expansion of a firm’s capacity leading to a rise in the average cost of production.