Effect
of demand on price elasticity is also known as price elasticity demand. It can
be expressed as percentage change in quantity upon percentage change in price.
This two are heavily interrelated to each other by having dependency on each
other. It shows the responsiveness of quantity needed with changing price of
commodity & vice versa.
There are three type of demand elasticity
in market which is dependent on pricing.
1.
Elastic demand – when price is reduced to increase revenue.
2.
Inelastic demand- when price is increased to increase revenue
3.
Unitary demand- in such case price increase or decrease don’t have
any effect on revenue .which suppose to hold the price as a constant.
in case of
·
Price elasticity have the Ped( price elasticity demand) value
<-1
·
Price in-elasticity have the Ped( price elasticity demand) value
fluctuate I between 0 to-1
In most
of the cases the normal market good have price elasticity is negative. In some
of the cases the price elasticity does not get negative it shows positive effect.
Such goods are called Veblen product. A lots of goods are consumed by public
which are use as a luxury item, such as expensive model of car, some other
luxury items. Consumer preferred those goods which have much expenses in market
and this contribute positive ‘Ped’.
As an example we can take an example of some of the fashion
product. In now a days there are a segment of people who used to buy a product
which usually cost higher then the other. Which lead us to the Veblen product.
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