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Saturday, June 11, 2011

What is Price Discrimination? Explain the basis of Price Discrimination.” You need to solve the assignment question for MBA Semester 1 MB0042 – Managerial Economics. It is the assignment of fall session. You can check out other assignment questions also such as - Different Categories of Environmental Stressors and Process of Negotiation.

The measurement of this sensitivity in terms of percentage is called Price Elasticity of Demand. According to Marshall, Price Elasticity of Demand is the degree of responsiveness of demand to the chance in price of that commodity.

Perfect elastic demand is a case of theoretical extremity. When a small change in price leads to a very substantial change in quantity demand, the price elasticity is numerically infinite.

When a demand for the product is independent of price, such demand remains unaffected with any magnitude of change in price.

To make relatively elastic simpler, we can say that any small change in price leads to a big change in quantity demanded. It can be an increase or decrease.

When there is less then proportionate change in demand to the change in price, we say that the demand is relatively inelastic that is Ep<1.

In numerical co-efficient of price elasticity of demand in different cases, we find that its value ranges from zero to infinite.

For those commodities which have enough substitutes in the market, the price elasticity is of more than one, because when the price of a commodity has many substitutes, the consumer will shift to the substitute available in the market.

The price elasticity of demand for durable goods will be more than one because when the price of such commodities increases, the demand will increase, but for the commodities like fish, vegetables etc., which come under perishable goods, the elasticity of demand will be less than one as these commodities cannot be stored.


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