## Wednesday, January 16, 2008

### Explain different types of Elasticity of Demand

Different types of Elasticity of Demand:-

# 2. Income elasticity of demand:

In economics, the income elasticity of demand measures the responsiveness of the quantity demanded of a good to the change in the income of the people demanding the good. It is calculated as the ratio of the percent change in quantity demanded to the percent change in income. For example, if, in response to a 10% increase in income, the quantity of a good demanded increased by 20%, the income elasticity of demand would be 20%/10% = 2.

# 3. Cross elasticity of demand:

In economics, the cross elasticity of demand and cross price elasticity of demand measures the responsiveness of the quantity demand of a good to a change in the price of another good.

It is measured as the percentage change in quantity demanded for the first good that occurs in response to a percentage change in price of the second good. For example, if, in response to a 10% increase in the price of fuel, the quantity of new cars that are fuel inefficient demanded decreased by 20%, the cross elasticity of demand would be -20%/10% = -2.

The formula used to calculate the coefficient cross elasticity

# The degree of responsiveness of quantity demanded to the change in the advertisement expense of expenditure.

1. Promotional elasticity of demand will be affected, depending on whether it is a new product or the product with a growing market.

3. The time interval between the advertisement expensed or expenditure and the unresponsiveness of the sales.

4. The influence of non-advertisement determinants of demands such as trends, price, income etc.

2. The fire should observe the saturation point, where advertisement pays nothing or does not help in increasing sales revenue.