Exploring Price Elasticity of Demand for Nasi Lemak
How can we calculate the arc price elasticity of demand for nasi lemak?
Given the initial price and quantity demanded for nasi lemak, how can we determine if the demand is elastic or inelastic?
What would happen to the total revenues from nasi lemak if the price decreased by 10%?
Discuss three factors that determine the price elasticity of demand for a good.
Calculation of Arc Price Elasticity of Demand
The arc price elasticity of demand for nasi lemak is calculated using the formula:
Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)
Elastic or Inelastic Demand for Nasi Lemak
Based on the calculation, is the demand for nasi lemak elastic or inelastic?
Impact on Total Revenues
If the price of nasi lemak decreases by 10%, what will be the impact on total revenues?
Factors Determining Price Elasticity of Demand
What are three factors that influence the price elasticity of demand for a good?
Calculation of Arc Price Elasticity of Demand
To calculate the arc price elasticity of demand for nasi lemak, we need to use the following steps:
1. Calculate the percentage change in quantity demanded
2. Calculate the percentage change in price
3. Use the formula to determine the elasticity
Elastic or Inelastic Demand for Nasi Lemak
The arc price elasticity of demand for nasi lemak is -0.625, indicating that the demand for nasi lemak is inelastic.
Impact on Total Revenues
If the price of nasi lemak decreased by 10%, the total revenues from nasi lemak would increase. This is because the demand for nasi lemak is inelastic, meaning that a decrease in price would lead to a relatively smaller increase in quantity demanded compared to the decrease in price.
Factors Determining Price Elasticity of Demand
Three factors that determine the price elasticity of demand for a good include:
1. Availability of substitutes: If there are many substitutes available for a good, consumers can easily switch to other options when the price of the good increases, making the demand more elastic.
2. Necessity of the good: If a good is considered a necessity, consumers are less likely to change their demand for it even if the price increases, making the demand less elastic.
3. Proportion of income spent on the good: If a good represents a large proportion of a consumer's income, they are more likely to be sensitive to changes in its price, making the demand more elastic.