Elasticity Importance for Managerial Decision Making

Managerial economics as defined by Edwin Mansfield is touch on with application of economic concepts and economic analysis to the problems of formulating rational managerial decision.Elasticity is a measure of the responsiveness of one economic variable quantity star to another. For example, advertising tensileity is the relationship between a transplant in a firms advertising budget and the resulting revision in product sales. Economists are often interested in the efficacious injury elasticity of indigence, which measures the response of the quantity of an item purchased to a wobble in the items price. A good or ally is considered to be extremely elastic if a slight flip in price leads to a sharp interchange in demand for the product or service. Products and services that are highly elastic are ordinarily more discretionary in geniusreadily available in the market and something that a consumer may not necessarily need in his or her mundane life. On the other han d, an inelastic good or service is one for which changes in price result in solitary(prenominal) modest changes to demand. These goods and services tend to be necessities. Elasticity is normally expressed as a positive number when the fictional character is already clear from context. Elasticity measures are reported as a proportional or portion change in the variable being studied.

The general formula for elasticity, represented by the letter E in the equation below, is: E = pct change in x / percent change in y. Elasticity can be zero, one, greater than one, less than one, or infinite. When elasticity is com prise to one there is unit elasticity. This ! join the proportional change in one variable is tinge to the proportional change in another variable, or in other words, the two variables are directly related and simulate together. When elasticity is greater than one, the proportional change in x is greater than the proportional change in y and the concomitant is said to be elastic. Inelastic situations result when the proportional change in x is less than the proportional...If you want to get a full essay, order it on our website: BestEssayCheap.com

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