# Elasticity Of Demand Essay

703 words - 3 pages

While doing the simulation of Digi-Val Inc. Was helpful when it comes to making decision for upgrades and demands with desktop computers. The demand for any product tends to be more price-elastic in the end than in the short run. One of the reasons for this is that in the long-run it is easier to find subsititues, for instance, Invest in a fuel-efficient car if the price of gasoline has increase.Price ElasticityThe percent change in demand quantity can be more or less than the change in its price. Relative elasticity/inelasticity of demand indicates whether the percent change in demand quantity is less than percent change in price. In the long-term, demand for any product tends to be more "price elastic" due to the availability of substitutes. Elasticity of Demand also indicates whether revenue will increase or decrease.SubstituteCross-price elasticity of demand is calculated as the percent change in demand divided by the percent change in price of the substitute and will determine the magnitude of the shift in the demand curve. Price elasticity is always positive for two substitutes.ComplementComplements-in-consumption are two or more goods that satisfy wants or needs when consumed jointly. Satisfaction is greater when both goods would consume together than when they are consuming separately. Buying and consuming either good by itself is not quite as satisfying as both goods combined. In many cases, if both complement goods will not consumed, then neither will be purchase. Buy both, or buy neither.IncomeA change in income causes a shift in demand, and income elasticity of demand calculate as the percentage change in demand divided by the percentage change in income determine the magnitude of this shift. As you have seen income, elasticity of demand is higher for product perceived as luxuries.Elasticity of Labor DemandLabor is a derived demand realized by the demand for the product that the labour will be producing. The theory of labour demand is normally an inverse relationship between the demand for labour and the wage rate that a business needs to pay for each additional worker employed. If the wage rate is high, it is more costly to hire extra employees....

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