Elasticity Research Paper Example | Topics and Well Written Essays - 2000 words

Elasticity - Research Paper ExampleMost of the strategies are designed to overcome the elasticity factor. handiness of credit being the important element in the scheme, the sellers ability to arrange finance for the consumers to buy their product plays an important role with the exceedingly developed financial services sector to-day. Exchange rates and interest rates are the important con grimacerations while buying on credit. The supply side constraints on account of events such as monsoon failure, industrial unrest and natural disasters and the regulation of supply through collusion under monopolistic conditions vitiate the trade conditions. The pharmaceutical companies taking advantage of the protection given under patents fix the prices at exorbitant levels for their products, the demand for which are inelastic in nature. This paper seeks to see elasticity of demand from a comprehensive perspective. Key words Elasticity, Demand, Price, Branding & Marketing. ELASTICITY OF DEMA ND Price Elasticity of Demand Law of demand states that opposite things being equal, the quantity demanded extends with a fall in price and contracts with a rise in price. (Mandal, 2007, p. 73) Under the dynamic market conditions, there are some(prenominal) factors which may influence the demand irrespective of change in price. Apart from the accepted exceptions such as prestige goods consumed by rich people which forms the tail for conspicuous consumption and speculative goods like shares where the demand will be more when the prices rise and demand for hoarding purposes due to scarcity or hyper inflation, technically the law of demand does not apply to necessaries of life where the demand is said to be inelastic. Robert Giffen discovery could be the real exception in this case. He open up that poor people will demand more of inferior goods if their prices rise. They reduce their expenditure on superior goods to conserve their little income to spend more on inferior goods. The quantum of change is explained by elasticity of demand or rate of change. The ratio of a recounting change in quantity to a relative change in price is called as elasticity. Mankiw states that economists compute the price elasticity of demand as the percentage change in the quantity demanded divided by the percentage change in price. That is, Percentage change in quantity demanded Price elasticity of demand = ----------------------------------------------------- Percentage change in price (2012, p.91) The image of price elasticity of demand is the primary force behind the innovations that we have witnessed during the last few decades. For instance, rising cost of fuel has forced the car companies to lying fuel efficient cars. The rise in fuel cost has been compensated by the increased mileage provided by the cars. (Annexure I) Hughes, Knittel, & Sperling concluded in their study that results project that technologies and policies for improving vehicle fuel economy may be increas ingly important in reducing U.S. gasoline consumption. (2006)The same concept leads the car manufacturers to decoct their attention on electric cars. The depleting natural resources and their increasing cost make the industrialists to concentrate on alternative renewable energy sources. The price elasticit