NEXT DEFINITION
Demands for Grants
Demand for Grants is the form in which estimates of expenditure from the Consolidated Fund are submitted in pursuance of Article 113 of the Constitution.
Read More
Definition: Demand sensitivity is also known as price elasticity of demand and should not be confused with price elasticity of supply. It shows the responsiveness of the demand for a product to a change in its price. Factors which impact demand sensitivity include – availability of substitutes, its necessity, distribution channels, permanent or temporary price change, etc.
Description: Demand sensitivity is referred to the change in demand for a product when its price is changed by a small amount.
Price Elasticity of demand = %change in quantity demanded/% change in price of a particular product
To understand the implication of this formula, we have to study the impact of a small change in price and its resultant impact on the quantity demanded. If a small change in the price of the product is accompanied by a large change in quantity, then the product is said to be elastic or we could also say that the product is responsive to price change.
We say that a product is inelastic when even a large change in price does not result in huge demand for the product. We can measure demand elasticity of demand on a scale of 0 to 1 and greater than 1.
If the price elasticity of demand is equal to zero then the demand is perfectly inelastic. If it is in between 0 and 1, demand is known as inelastic. If the price elasticity of demand is equal to 1, it is known as unit elastic, and finally if it is greater than one, the price elasticity of demand is known as perfectly elastic.
Let’s understand this with the help of an example. If the quantity demanded for a good increases by 20% in response to 15% decrease in price, the price elasticity of demand would be 20%/15% = 1.3. Here the value is greater than 1 which signifies that the demand is perfectly elastic.
NEXT DEFINITION
Demands for Grants
Demand for Grants is the form in which estimates of expenditure from the Consolidated Fund are submitted in pursuance of Article 113 of the Constitution.
Read More