Economics is a science. It deals with the what, how, when of resource utilization by the humans.
What is Price Elasticity?
Price elasticity is reflects the price one is ready to pay for a quantity of good.
Now let us suppose for example, how much would I pay for a shirt
When I enter the UCB (United Colors of Benetton) shop. Normally the price range a one shirt is Rs. 2800-Rs 3000. Given the price of shirts I would have normally purchased only 1 shirt. But that particular day the shop announces a discount of 25% on each shirt. I make a quick calculation and think that the offer is attractive and hence I can purchase 2 shirts instead of 1.
Now the shop keeper tells me if I buy 3 shirts I can avail a discount of 35% on each shirt. This seems even more attractive. I finally make a purchase of 3 shirts instead of 1.
So price elasticity is simply the price I am ready to pay for a quantity of good.
Usually the classification goes as products that are elastic (the example above) and some that are inelastic and unit elastic.
Salt is inelastic because even if the Rs 15 per KG bag is offered to me at Rs. 5 I would not purchase extra bags of salt.
Unit elastic is when normally I pay Rs. 100 for 1 kilo of basmati rice but if the same is available for Rs. 80 per kilo I would buy 1.2 kilos of the rice.
No comments:
Post a Comment