Socio Political And Economic Comparisons Essay examples

793 Words Mar 27th, 2016 4 Pages
Socio-political and Economic Comparisons
Based on Mankiw (2012), the law of demand infers that a decline in the price of a good increases the quantity demanded. Therefore, the price elasticity of demand gauges how much the quantity demanded reacts to a change in price. Demand for a product is deemed to be elastic in scenarios where the quantity demanded reacts considerably to changes in the price. Demand is described as inelastic if the quantity demanded responds only slightly to changes in the price.
The price elasticity of demand for any product gauges how willing shoppers are to purchase less of the product as its price increases. Since the demand curve shows the many economic, social, and psychological forces that drive preferences of consumers, there exists no seamless, universal rule for what governs the demand curve’s elasticity. However, it is no exaggeration to imply that some general principles stimulate the price elasticity of demand. Case in point, products with close substitutes are inclined to have more elastic demand as it is less difficult for consumers to alternate between products. For instance, butter and margarine are effortlessly substitutable, hence a marginal rise in the price of butter, assuming the price of margarine remains constant, causes the quantity of butter sold to decrease. In contrast, owing that eggs are a product without a near substitute, the demand for eggs is less elastic than the demand for butter, according if the price of eggs goes…

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