Economic Analysis (522) First Assignment
Q.1 Write one page comprehensive note on each of thefollowing:Ans.D
Demand is the power to purchase a product coupledwith willingness to purchase it. The law of demandstates that when the price of a good increases, thequantity demanded of it falls and
. Thephenomenon of demand elasticity refers the level of change in quantity in response to change in price.Economists define the demand elasticity as:“The degree of responsiveness in the demandfor a good to a change in its price.”For example a person who has a lot of income, hisdemand will be less elastic while the low incomeperson’s demand will be elastic. So with demandelasticity we find about the impact of a price change ontotal revenue. Demand is elastic if a price reductionincreases total revenue. Demand is inelastic if a pricereduction decreases total revenue and in the unitelastic case, a price change has no effect on revenue.
Ejaz Alam Khan - H 5279752 # 1