Price Elasticity of
Demand for Rice
Price
elasticity of demand is a unit-free measure of the responsiveness or
sensitiveness of the quantity of a good or service demanded to change in its
price when all other influences on buying plans remain the same.
Elastic demand is defined as a large
percentage change in quantity demanded for given percentage change in price.
Inelastic demand is defined as a small percentage change in quantity demanded
for given percentage change in price. Unit elastic demand is defined as given in
percentage change in price, there will be an equal percentage change in
quantity demanded.
Calculating
Price Elasticity of Demand
The
graph above shows that the price of rice has risen from P0 to P1. If the
coefficient of price elasticity of demand is between 0 and 1, therefore the
demand is in elastic. For example, a 10% rise in price of rice might cause the
demand for rice to decrease by 5%.
If price elasticity of demand is lesser than 1, therefore the demand responds more to a change of price. Therefore, the demand for rice is elastic.
There are a few determinants of elasticity for rice. The availability of substitutes. The more substitutes a particular product has, the more elastic the demand. For example, rice can be substituted with bread. Next, level of income. People with higher incomes tend to have an inelastic demand. For example, people with high income don’t have a problem the rise of price for rice. Then, price of the product itself. The more expensive a particular product, the more elastic it is.
The price elasticity of demand is affected by the time period allowed following a price change. The longer the consumers have to respond to a price change, the more elastic the price. If the rise of price in rice is long-term, consumers should change their consumption decisions or find substitutes.
What are the other determinants of elasticity?
ReplyDeleteIncase of rice, weather and seasonal cycles would also play an important role.Rainfall,temperature would affect the yield of crop n therefore price.whereas in seasonal cycles, at the time harvesting , there would be large supply of crop.So no variation in demand.
DeleteThis comment has been removed by the author.
ReplyDeletethanks for your Q&As but this blog is only for our class project. :)
ReplyDeletethe demand for rice as a good is very inelastic. If the price elasticity of demand is less than 1, the demand for the good is INELASTIC
ReplyDeleteHere is the investors contact Email details,_ lfdsloans@lemeridianfds.com Or Whatsapp +1 989-394-3740 that helped me with loan of 90,000.00 Euros to startup my business and I'm very grateful,It was really hard on me here trying to make a way as a single mother things hasn't be easy with me but with the help of Le_Meridian put smile on my face as i watch my business growing stronger and expanding as well.I know you may surprise why me putting things like this here but i really have to express my gratitude so anyone seeking for financial help or going through hardship with there business or want to startup business project can see to this and have hope of getting out of the hardship..Thank You.
ReplyDeleteGood articles, Have you heard of LFDS (Le_Meridian Funding Service, Email: lfdsloans@outlook.com --WhatsApp Contact:+1-9893943740--lfdsloans@lemeridianfds.com) is as USA/UK funding service they grant me loan of $95,000.00 to launch my business and I have been paying them annually for two years now and I still have 2 years left although I enjoy working with them because they are genuine Loan lender who can give you any kind of loan.
ReplyDelete