Micro Economics Elasticity of Demand

Question: Discuss about theMicro Economicsfor Elasticity of Demand. Answer: The decrease or increase in the consumption of a commodity demanded due to the change in several economic variables is known as elasticity of demand. The consumer faces changes in their demand based on three factors namely price of the particular commodity, income of the consumer and the existence of other similar goods (Varian, 2014). Elasticity depending on availability of similar goods are known as cross price elasticity, depending on the income of the consumer it is called income elasticity and depending on the price of goods it is called price elasticity. If the demand fluctuates along with the change in these economic variables then the good is called to be elastic in nature. On contrary is demand for any goods does not change even with the fluctuation in economic variables it is inelastic in nature (Rios, McConnell Brue, 2013). One elastic demand faced by consumers is daily life is that of electronic goods the demand for which varies in accordance to variation in price. One example of inelastic demand faced by consumers is that of pharmaceutical products specially life saving drugs, the demand for which remains unchanged even if price changes. References: Rios, M. C., McConnell, C. R., Brue, S. L. (2013).Economics: Principles, problems, and policies. McGraw-Hill. Varian, H. R. (2014).Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton Company.