Elasticity Essay Example | Topics and Well Written Essays - 2500 words - 1

Elasticity - Essay Example The essay explains the three elements of elasticity and their respective implication on the organisations. By elaborating on the different needs of elasticity the essays proposes to identify the implications of the concepts on the organisations. Furthermore, with the use of examples, the paper intends to illustrate the different concepts that are related with the practical implications of the same on the organisational backdrop. The ‘price elasticity of demand’ is defined as â€Å"is the ratio of the percentage change in the quantity demanded of a commodity to a percentage change in price† (Jain, & Ohri, 2010). Price is one of the most important factors that determine the amount of goods that is likely to be demanded by the consumers. The change in price of a product has a direct impact on the overall demand of a consumer. This measure of elasticity helps in identifying the sensitivity of consumers based on their individual needs of demanding a particular product as per the change in price. The price elastic goods are often noted to be having a huge shift in the quantity demanded based on a slight shift in the price of the product. It is noted that determination of price of a commodity in the economy is quite significant (Hirschey, 2008). Price elasticity is the most common type of elasticity of demand and is measured in terms of the reaction that a product has towards change in price. T he following equation helps in determining the measure of price elasticity of demand. The above equation illustrate that the price elasticity of demand helps in measuring the sensitivity of a product towards percentage change in quantity demanded based on price. The same could be justified using graphical representation. The graph depicts that at A the price of the commodity is denoted by P whereas the demand of the commodity is denoted as Q. Notably, with the fall in the price of commodity from P to P1 the quantity of the commodity