Elasticity Importance for Managerial Decision Making

Managerial economics as defined by Edwin Mansfield is concerned 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 uncertain star to another. For example, advertising tensileity is the relationship between a direct in a firms advertising budget and the resulting revision in product sales. Economists are often interested in the jural 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 jock is considered to be highly elastic if a slight substitute in price leads to a sharp lurch 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 hand, 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 ordinarily expressed as a positive number when the suit 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 = percent change in x / percent change in y. Elasticity can be zero, one, greater than one, less than one, or infinite. When elasticity is comprise to one there is unit elasticity. This subjec t matter the proportional change in one vari! able is touch on to the proportional change in another variable, or in other words, the two variables are directly related and impress together. When elasticity is greater than one, the proportional change in x is greater than the proportional change in y and the incidental 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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