Chapter 2

Demand and its Elasticities

Demand
Demand
Demand is defined as a consumer's willingness and ability to purchase a product at a given price. 'Willingness' represents the readiness to ...
Law of Demand
Law of Demand
The law of demand states that when the price of goods increases, consumers tend to buy less, and vice versa, assuming all other factors affecting demand ...
Mathematical Representation of the Demand Curve
Mathematical Representation of the Demand Curve
Demand curves can be represented mathematically. This helps to quantify the law of demand and predict how consumers will react to price changes. ...
Market Demand
Market Demand
Market demand is the total quantity of a product that all consumers in a specific market are willing to buy at a given price. Market demand shows how ...
Effect of Related Goods on Demand Curve: Substitutes
Effect of Related Goods on Demand Curve: Substitutes
Substitutes are products that can serve as replacements for one another. The availability and price of substitutes can significantly influence the demand ...
Effect of Related Goods on Demand Curve: Complementary Goods
Effect of Related Goods on Demand Curve: Complementary Goods
Complementary goods are products used together, like gasoline and gasoline cars or a tennis racket and a tennis ball. When the price of one product ...
Effect of Income on Demand Curve: Normal Goods and Luxury Goods
Effect of Income on Demand Curve: Normal Goods and Luxury Goods
Normal goods are products whose demand increases as consumer income rises and decreases when income falls. Consider smartphones as an example. As ...
Effect of Income on Demand Curve: Inferior Goods
Effect of Income on Demand Curve: Inferior Goods
An increase in consumers' income usually means they want to buy more of a good. However, that's not always true. Some goods exhibit a peculiar ...
Other Factors Affecting Demand
Other Factors Affecting Demand
Consumer tastes and preferences have a significant influence on demand. For example, if more people prioritize health, they may increase their purchase of ...
Elasticity of Demand (E<sub>d</sub>)
Elasticity of Demand (Ed)
The price elasticity of demand measures the responsiveness of the quantity demanded to changes in price for a particular product. It quantifies how ...
Ed through Percentage Method
Ed through Percentage Method
Price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. It is computed as the ratio of the percentage change ...
Degrees of Elasticity of Demand
Degrees of Elasticity of Demand
Degrees of elasticity of demand describes how the demand for different goods changes to price changes. It categorizes goods into five degrees based on ...
Degrees of Elasticity of Demand and the Demand Graph
Degrees of Elasticity of Demand and the Demand Graph
Demand curves visually represent the elasticity of goods and services. Perfectly elastic goods have a horizontal demand curve, indicating that any price ...
Ed through Mid-point Method
Ed through Mid-point Method
Consider two points on a demand curve: point A and point B. At point A, the price is 6 dollars, and the quantity demanded is 120 units. At point B, the ...
Elasticity and Slope
Elasticity and Slope
The slope and elasticity of a demand curve might appear similar, but they differ significantly. The slope of a demand curve measures the rate at which the ...
Elasticity of a Linear Demand Curve
Elasticity of a Linear Demand Curve
The price elasticity of demand for any good can be expressed as the change in quantity demanded associated with a change in price multiplied by the ratio ...
Effect of Close Substitutes on Elasticity of Demand
Effect of Close Substitutes on Elasticity of Demand
Close substitutes of a product affect consumers' sensitivity to its price changes. If more substitutes are available for a product, consumers can ...
Effect of Necessities and Luxuries on Elasticity of Demand
Effect of Necessities and Luxuries on Elasticity of Demand
The classification of goods into necessities or luxuries plays a crucial role in determining their price elasticity. Necessities encompass essential goods ...
Effect of Time Horizon and Other Factor on Elasticity of Demand
Effect of Time Horizon and Other Factor on Elasticity of Demand
The elasticity of goods and services changes over time. Generally, goods exhibit more elastic demand in the long run. For instance, when there is a sudden ...
Cross-Price Elasticity of Demand
Cross-Price Elasticity of Demand
Cross-price elasticity of demand measures how the quantity demanded of one good changes in response to a price change in another. It is calculated as the ...
Income Elasticity of Demand
Income Elasticity of Demand
Income elasticity of demand measures how much people change their buying habits when their income changes. It is quantified as the percentage change in ...
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