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Egt1 Task 2 Essay

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Below is an essay on "Egt1 Task 2" from Anti Essays, your source for research papers, essays, and term paper examples.

A. Economists measure the elasticity of a product of service in order to see if the quantity demanded will change along with the price. The elasticity of demand is the change in demand for the product or service if the price for the product or service increases or decreases. The change in the demand can be classified into three different categories: elastic, inelastic and unit elastic. To compute the price elasticity of demand you would divide the relative change of quantity demanded by the relative change in price. If the product or good is elastic the numerator is larger than the denominator, then the demand for the product or good will significantly change with the change in price. If the numerator is smaller than the denominator then the product or good is inelastic, meaning the demand for the product or good will not change significantly with the change in price. If the answer from the formula is equal to 1 then the product or good is unit-elastic, and the quantity demanded will remain the same even if the price changes.
B. Cross-price elasticity is how the demand for a product or good is affective when there is a change in price for another product or good. When the price for Dell laptops increases will the demand for Dell desktops increase? In order to compute the demand you would divide the relative change of quantity demanded of Dell Desktops by the change in price of the change in price of Dell laptops. If the answer is greater than zero the two products are substitutes for each other. If the answer is less than zero the two products would be complements to each other.
C. Income elasticity is how much of your income will spend on different types of goods. Your income decides what type of goods purchased. The percentage of your income spent on normal goods, which includes rent, groceries and normal goods that you would purchase on a monthly basis. Inferior goods are inelastic, depending on your income you may or may not purchase inferior goods. Normal...

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