Wgu Egt 1 Task 2 Elasticity

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EGT 1 Task 2: Elasticity Jeffery S. Short #0257373 Element A: The world of business exists because of the consumer. Business owners are concerned if customers will purchase the goods they offer and how they will react to the constant changes that occur in the marketplace. If a business owner can estimate how consumers will react to product offerings or the changes to those products, then they can offer better services while maintaining profitability. Economists study the many variables involved in the marketplace by observing how consumers react to changes in products, pricing, supply and demand in an effort to classify or codify trends. They then develop calculations to categorize these consumer patterns, and then use them as tools to provide insight into consumer reactions and possible future buying patterns. One of these tools is called the Price Elasticity of Demand. The Price Elasticity of Demand measures how consumer demand changes as a result of changes in price and it is represented as a coefficient. Elasticity is the main aspect of this coefficient and it represents how responsive or elastic consumers are to price fluctuations. This coefficient is calculated by dividing the change in demand by the original demand, and subsequently dividing that total by the change in price divided by the original price and the final…show more content…
For a relatively small purchase that represents an insignificant percentage of monthly income, the consumer will typically not be concerned or change a purchasing practice based upon a price increase. For example, the consumer would continue to purchase a candy bar even if the price increased by 40%. It can be stated that they continued to purchase the candy bar because the purchase price was only a small portion of monthly income despite the high percentage of price

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