Price Elasticity of Demand Harvard Case Solution & Analysis

Price Elasticity of Demand Case Solution

Introduction

            Market varies according to the needs and wants of the consumers. The demand is created in response to the consumer’s willingness to pay and willingness to buy.The price varies from elasticity to the in elasticity in its nature (Sousa, 2014). When there is a small change of demand due to change in the price of a commodity, it is known as elasticity of demand. However, when there is a large change in demand of the commodity, the change is said to be inelastic in its nature (Terry Roe).

            The inelastic demand is for the necessity products of the market. However, elasticity of demand exists for the luxurious demand. Elasticity of demand exists when there is a presence of an alternative product(s) in the market (Sousa, 2014). Furthermore, elasticity for the demand remains in creased when the market defined narrowly to the product for one another, for example food and ice cream. In the long-run, price elasticity is greater because consumers are able to adjust their purchase behavior (Bittlingmayer, 1992).

 It is determined with the help of price change in quantity demanded to the percentage change of the price (Fouquet, 2013).The elasticity of demand depends on whether we move from a point of quantity demanded to the point second point of quantity demanded. Moreover, a price variation can be seen with the change of quantity A to B or B to A, in accordance to the quantity demanded (Sousa, 2014).

Literature Reviews

Fouquet (2013) has investigated change of energy services after revolution of industries. It has demonstrated price and income elasticity of demand in the passenger of transport, domestic level heating and lighting in United Kingdom. The research has followed evidence of past two decades and analyzed the trends of income elasticity as a U-shaped curve as well as price elasticity as the U-shape of curve. This analysis made the research to draw development of economy and the services of pricing fall. Furthermore, it has developed a concern of boost of demand due to energy and technological transition. The evidence thus, suggested consumption of energy services in the countries that are well developed. Moreover, the prediction was about the increase of industries in order to meet the demand. The increment in increased number of industries would led towards full transition that would cause energy resources and technologies to the low carbon utilization. However, it will result in the increase of global emission of the carbon dioxide in long run.

            Hughes (2007) has investigated the price elasticity of demand in short-run for the demand of Gasoline. The study concerned about the gasoline services to the consumers in United States. The study has based upon the two critical periods of United States that were developed through price and income elasticity of demand. Comparison of price and income elasticity of demand however, conducted among the period of 1975 to 1980 and 2001 to 2006. Hence, the study revealed that the price elasticity differ among the periods at it ranged from -.034 to 0.077 among 2001 to 2006 session and it varied 0.21 to 0.75 in the session of 1975 to 1980/. However, the evident showed that the income elasticity has remained insignificantly variant among the both periods it was approximately 0.21 to 0.75 during both sessions.....................

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