Consumer Responsiveness Elasticity

Economists use elasticity to measure consumer responsiveness to changes in the various determinants associated with demand. Elasticity addresses percentage changes i.e. a percentage change in quantity demanded divided by a percentage change in (own price, the price of another good, or income). Understanding elasticity is important to businesses and policy makers alike as they consider how a potential change will impact markets when consumers adjust their purchasing behaviors. Help answer questions A-GTask:A. Discuss elasticity of demand as it pertains to elastic, unit, and inelastic demand.Answer: Elastic demand: When a small change in price leads to a greater change in demand, the demand is said to be elastic or more elastic. Here the elasticity of demand is said to be greater than unity. In this case proportionate change in demand will be more than the proportionate change in price. Unit elastic demand: Demand for a commodity will be said to be unitary elastic if the percentage change in quantity demanded equals to the percentage change in price. The numerical measurement of the elasticity will be equal to one. In other words when demand changes in the same proportion as in the price of the commodity, the elasticity of demand is equal