case study for elasticity of demand
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The economic measures of how much the quantity demanded changes when the price changes is called price elasticity of demand. This response can be calculated by divided the percentage in quantity by the percentrage change in price. It is always end up negative. Determinants that affect price elasticity of demand include the number and closeness of substitute goods, the proportion of income spent on the good and the time period. They are directly related to the elasticity coefficient. Price elasticity of supply is a measure of how much the quantity supplied changes when the price changes. It is the ratio of the percentage change in quantity supplied to the percentage change in price. It is usually positive. Supply is determined whether elastic or inelastic depends on two main determinants: the ability of sellers to change the amount of the good they produce when the price changes and the time period.
Price elasticity can be used to predict the effect of a change in price on the total revenue and expenditure on a product or the effect of a change in a gorvernment indirect tax on price and quantity demanded.
Income elasticity of demand measures the rate of response of quantity demanded due to a raise (or lowering) in consumers income. It will be more elastic the more luxurious the good and the less demand is fulfilled as consumption increases. It is an important concept to firms considering the future size of the market for their product.
Finally, the assignment will study the case of demand for cigarettes in Vietnam and the ways are being considered to reduce the number of people smoking from elasticity point of view.
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