Price elasticity of demand ~ Elasticity price request is a tool/concept used to measure the degree of sensitivity/response to changes in the quantity/quality of goods purchased as a result of changes in influencing factors.
Price elasticity of demand
Price elasticity of demand
Elasticity of demand (elasticity of demand) is the effect of changes in price on the size of the quantity demanded for goods or the level of sensitivity of changes in the number of requests for goods to changes in the price of goods. Meanwhile, the size of the change in demand is expressed in the elasticity coefficient or the elasticity number, abbreviated as E, which is expressed by the following formula:

Price Elasticity of Demand Formula
Price elasticity of demand

Information:

Q : change in number of requests

P : change in price of goods

P: initial price

Q: the number of initial requests

Ed : elasticity of demand

The price elasticity of demand is a comparison of the percentage change in the quantity demanded of a good with the percentage change in the price in the market, in accordance with the law of demand, where if the price increases, the quantity of goods decreases and vice versa.

The elasticity associated with the price of the good itself. Price elasticity (Ep) measures how much percent the demand for a good changes when its price changes by one percent.

This price elasticity index / coefficient can be less than, equal to greater than one And is an absolute number (absolute), so the demand can be said:

  1. Not elasticity (in elastic);
  2. Unitari (unity); and
  3. Elastic (elastic).

There are three forms of price elasticity of demand:

  1. If a change in price results in a change that is greater than the quantity demanded, it is called elastic elasticity, where the coefficient is greater than one (Eh>1). The shape of the demand curve is more sloping.[ % ΔP > % Δ Q].
  2. If the percentage change in price is the same as the percentage change in the quantity demanded, it is called unity elasticity, where the coefficient is equal to one (eh=1), the shape of the demand curve forms an angle of 45 degrees from the point of origin. [% ΔP = % Δ Q].
  3. If the percentage change in price results in a smaller increase in the quantity demanded of a good, it is called an inelastic elasticity where the coefficient is smaller than one (Eh < 1). The shape of the demand curve is more blurry. [ % ΔP < % Δ Q]In addition to the three forms of price elasticity of demand above, there are two more price elasticity of demand, namely:
  • Perfectly elastic demand (perfectly elastic), this is the highest level of possible elasticity, where the greatest response of the quantity demanded of goods to the price.
  • The demand curve is perfectly inelastic, this is the lowest level of elasticity, where the response of the quantity demanded of goods to price changes is very small. Factors Affecting the Price Elasticity of Demand.

There are several factors that determine the price elasticity of demand:

  1. Whether or not substitute goods are available in the market;
  2. Number of users/level of need for the item;
  3. Types of goods and consumer preference patterns;
  4. The period of time available to adjust to changes in price/period of use of the goods; and
  5. The relative ability of the budget to import goods.

Elasticity will be large if:

  1. There are many good substitutes;
  2. Prices are relatively high; and
  3. There are many possible uses for other items.

Elasticity will generally be small, if:

  1. The object is used in combination with other objects;
  2. The goods in question are available in large quantities, and at low prices; and
  3. For these goods there are no good substitutes, and these things are very much needed.

Reference :

  1. Rhardja, Pratama, Mandala Menrung. (2008). Introduction to Economics (Microeconomics and Microeconomics). Jakarta: FEIU.
  2. Nopirin, Introduction to Macro and Micro Economics, BPFE, UGM, Yogyakarta, 2000
  3. Sukirno, S, 2011, “Introduction to Microeconomic Theory”, PT Raja Grafindo Persada, Third Edition, 26th Edition, Jakarta.
  4. http://myilmu Lintas Hukum.blogspot.co.id/2015/12/teori-permintaan.html
  5. http://myilmu Lintas Hukum.blogspot.co.id/2015/12/pengertian-elastisitas.html

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