Cross elasticity reflects. Elasticity of supply and demand. Point price elasticity of demand

A given commodity depends not only on its own price, but also on the prices of other commodities. For example, the demand for Zhiguli depends not only on the price of Zhiguli, but also on the prices of foreign cars of a similar class, spare parts, gasoline, etc.

Cross price elasticity of demand shows by what percentage the demand for a product changes A(d a) when the price of the product changes IN(P b) by 1%.

Formula for calculating the cross elasticity coefficient:

Three cases are possible:

1. If, with an increase (decrease) in the price of a product IN demand for goods A grows (decreases), then such goods are called interchangeable(substitutes).

In this case.

For example, Coca-Cola has risen in price by 10%, as a result of which the demand for it has decreased, but the demand for Pepsi-Cola has increased, say, by 15%. Therefore, the cross elasticity of demand for Pepsi with respect to the price of Coca-Cola is

If Coca-Cola, on the contrary, becomes cheaper (the percentage change in price will be negative), then the demand for Pepsi will fall (the percentage change in demand will be negative). Then both the numerator and the denominator will contain numbers with negative signs, but the result will still be positive.

2. If, with an increase (decrease) in the price of a product IN demand for goods A decreases (increases), then such goods are called complementary(complementary).

In this case.

For example, car parts prices went up by 10%, causing the demand for cars to fall by 5%. Therefore, the cross elasticity of demand for cars with respect to the price of spare parts is:

In turn, when the cost of spare parts becomes cheaper, the demand for cars will increase, but the elasticity of demand for cars with respect to the price of spare parts will remain negative.

3. If, with an increase (decrease) in the price of goods B, the demand for goods A does not change, then such goods are called independent.

In this case .

Let soccer balls become more expensive (cheaper). Most likely, this will not have any impact on the demand for perfume. Therefore, the price of the balls will be zero for perfume.

The analysis made it possible to identify the general directions of changes in supply and demand under the influence of price and non-price factors and formulate the basic law - the law of supply and demand. However, it is often not enough for a researcher to know that an increase in price causes a reduction in the volume of demand for a product; a more accurate quantitative assessment is needed, because the specified reduction can be fast or slow, strong or weak.

Sensitivity to changes in prices, income or any other indicators of market conditions is reflected in the elasticity indicator, which can be characterized by a special coefficient.

The concept of elasticity in economic theory appeared quite late, but very quickly became one of the fundamental ones. General concept elasticity came to economics from the natural sciences. The term "elasticity" was first used and applied in scientific analysis famous 17th century scientist, physicist and chemist Robert Boyle(1626-1691) when studying the properties of gases (the famous Boyle-Mariotte law).

The economic definition of elasticity was first given in 1885. The famous English scientist does not invent this concept, but using the achievements of English classics (Adam Smith and David Ricardo) and the mathematical school in economic theory, he gives a definition of the coefficient of price elasticity of demand.

The introduction of elasticity into economic analysis is of great importance:

on the one hand, the elasticity coefficient is a statistical measurement tool, including one actively used in marketing research(consulting firms in the US charge between $50,000 and $75,000 to calculate elasticities for private firms);
on the other hand, the concept of elasticity serves as an important tool economic analysis, since in science it is not enough just to measure, it is also necessary to be able to explain the result obtained.

Today there is not a single section of economics where the concept of elasticity is not used: analysis of supply and demand, theory of the firm, theory of business cycles, IEO, economic expectations, etc.

The most general definition of elasticity— the ratio of the relative increment of the function to the relative increment of the independent variable.

For the demand and supply functions we are considering, such independent variables can be the prices of this or other goods, the level of income, costs, etc.

Elasticity coefficient

Elasticity coefficient shows the degree of quantitative change in one factor (for example, the volume of demand or supply) when another (price, income or costs) changes by 1%.

Elasticity of demand or supply is calculated as the ratio of the percentage change in the quantity of demand (supply) to the percentage change in any determinant.

Determinants are factors that influence demand or supply.

Different products differ in the degree to which demand changes under the influence of one or another factor. The degree of responsiveness of demand for these goods can be quantified using the elasticity of demand coefficient.

The concept of elasticity of demand reveals the process of market adaptation to changes in the main factors (price of a product, price of a similar product, consumer income).

Methods for calculating the elasticity coefficient

When calculating the elasticity coefficient, two main methods are used:

Arc Elasticity(arc elasticity) - used to measure the elasticity between two points on a demand or supply curve and assumes knowledge of initial and subsequent price levels and volumes.

Using the arc elasticity formula gives only an approximate elasticity value, and the more convex the arc AB is, the greater the error.

Elasticity at a point(point elasticity) - used when the demand (supply) function and the initial level of price and quantity of demand (or supply) are specified. This formula characterizes the relative change in the volume of demand (or supply) with an infinitesimal change in price (or some other parameter).

Example 1

Condition: Let the demand function have the form .

Estimate the price elasticity of demand at price .

Solution:

Answer: The economic meaning of the obtained value is that a change in price by 1% relative to the initial price P = 10 will lead to a change in the quantity demanded in the opposite direction by 1%. Demand has unit elasticity

Example 2

Condition: Let the demand equation be given: P = 940 - 48*Q+Q 2

Estimate the price elasticity of demand for sales volume Q = 10.

Solution:

With Q \u003d 10, P \u003d 940 - 48 * (10) + 10 2 \u003d 560
Now let's find the value of dQ/dP. However, since the equation is for quantity rather than price, we need to find the value of dP/dQ:
Mathematically proven: dQ/dP = 1 / (dP / dQ)
And this gives us: dQ/dP = 1 / (-48 +2*Q).
With Q = 10 we get: dQ/dP = -1/28.
Substituting into the elasticity formula at a point, we get: E = (dQ/dP)*(P/Q) = (-1/28)*(560/10) = -2

Answer: The economic meaning of the coefficient obtained is that a change in the market price by 1% relative to the current price P = 560 will change the amount of demand in the opposite direction by 2%. Demand at this point is elastic.

Elastic properties

From the definition of elasticity and the above formulas, we can derive the main properties of elasticity:

Elasticity is an immeasurable quantity, the value of which does not depend on the units in which we measure volume, prices or any other parameters.
Elasticity of mutually inverse functions - mutually inverse quantities:

E d - price elasticity of demand;
E p - price elasticity according to demand;

3. Depending on the sign of the elasticity coefficient between the factors under consideration, the following may occur:

Direct dependence, when the growth of one of them causes an increase in the other and vice versa, for example, the elasticity of demand for goods by consumer income E > 0;
An inverse relationship, when an increase in one of the factors implies a decrease in another, for example, price elasticity of demand E<0;

4. Depending on the absolute value of the elasticity coefficient, the following are distinguished:

E = ∞, or absolute elasticity, when a slight change in any parameter increases (or decreases) the volume by an unlimited amount.
|E| > 1, or elastic demand (supply), when the parameter grows more than at a fast pace than another factor changes.
E = 1, or unit elasticity when the parameter under consideration grows at the same rate as the factor affecting it;
0 < E < 1, или inelastic demand (supply), when the growth rate of the parameter under consideration is less than the rate of change of another factor;
E = 0, or absolute inelasticity when a change in any parameter of market conditions does not affect the value of the factor under consideration;

Let us consider in more detail the most common indicators of elasticity:

direct price elasticity of demand
income elasticity of demand,
cross elasticity of demand,
price elasticity of supply.

Price Elasticity of Demand

Price Elasticity of Demand shows the degree of quantitative change in demand when the price changes by 1%.

For all goods except for , the price elasticity of demand is negative.

There are three options for the dependence of the volume of demand on fluctuations in market prices:

Inelastic Demand occurs when the quantity purchased increases by less than 1 percent for every 1 percent decrease in its price.
An increase in the purchased product by more than 1% and a decrease in its price by 1%. This option characterizes the concept elasticity demand.
The amount of goods purchased doubles as a result of the price halving. This characteristic introduces the concept unit elasticity.

ΔQ—change in demand;

Factors of demand elasticity

Among the main factors determining the price elasticity of demand are the following:

availability and accessibility of substitute products on the market (if there are no good substitutes for a product, then the risk of a decrease in demand due to the appearance of its analogues is minimal);
time factor (market demand tends to be more elastic in the long run and less elastic in the short run);
the share of spending on a product in the consumer budget (the higher the level of spending on a product relative to the consumer’s income, the more sensitive the demand for price changes will be);
the degree of market saturation with the product in question (if the market is saturated with some product, for example, refrigerators, then it is unlikely that manufacturers will be able to significantly stimulate their sales by lowering prices, and vice versa, if the market is unsaturated, then lowering prices can cause a significant increase in demand);
variety of possibilities for using a given product (the more different areas of use a product has, the more elastic the demand for it. This is due to the fact that an increase in price reduces the area of economically justified use of a given product. On the contrary, a decrease in price expands the scope of its economically justified use. This explains the fact that the demand for universal equipment is, as a rule, more elastic than the demand for specialized equipment);
the importance of the product for the consumer (if the product is necessary in everyday life (toothpaste, soap, hairdresser services), then the demand for it will be inelastic to price changes. Products that are not so important for the consumer and the purchase of which can be postponed are characterized by greater elasticity ).

Factors of demand inelasticity

Sensitivity various groups consumers' attitudes towards the price of the same product may differ significantly.

The consumer will be price insensitive under the following conditions:

The consumer attaches great importance to the characteristics of the product (demand is price inelastic if “failure” or “deceived expectations” lead to significant losses or inconveniences. To avoid such a situation, a person is forced to overpay for the quality of the product and purchase those models that perform well recommended);
The consumer wants a custom-made product and is willing to pay for it (if the buyer wants a product made to suit his individual needs, he often becomes tied to the manufacturer and is willing to pay a higher price as a fee for the hassle. Later, the manufacturer can increase the price of its services without much risk of losing a buyer)
The consumer has significant savings from using a specific product or service (if the product or service saves time or money, then the demand for such a product is inelastic)
The price of the product is small compared to the consumer’s budget (if the price of the product is low, the buyer does not bother going shopping and carefully comparing products)
The consumer is poorly informed and makes poor purchases.

Income Elasticity of Demand

Income Elasticity of Demand can be defined by analogy with price elasticity of demand as the degree of quantitative change in income by 1%.

Due to the fact that an increase in income increases the possibilities of making purchases, the demand for most goods increases with an increase in income, i.e. The income elasticity of demand is positive. If the elasticity coefficient in absolute value is extremely small (0<Е<1), то речь идет о товарах первой необходимости. Если же — достаточно велик (Е>1), then about luxury goods.

For low quality goods, i.e. "relative to the worst", the income elasticity of demand will be negative (E<0).

Cross elasticity of demand

Cross elasticity coefficient characterizes the degree of change in demand for one product when the price of another product changes by 1%.

Depending on the nature of the relationship between the analyzed goods, the coefficient can be positive, negative or equal to zero:

If E > 0, then the goods are interchangeable (for example, butter and margarine). An increase in the price of one good leads to an increase in the demand for another, replacing it.
If E< 0, то товары считаются взаимодополняющими (например джин и тоник). Повышение цены на один товар ведет к сокращению спроса на другой.
If E = 0, then the goods are considered independent of each other and an increase or decrease in the price of one good has almost no effect on the amount of demand for the second good.

The main factor determining the cross elasticity of various goods is the consumer properties of various goods, their ability to replace or complement each other in consumption. Cross elasticity can be asymmetric in nature, when one product is strictly dependent on another. For example: the computer market and the mouse pad market. A reduction in the price of computers causes an increase in demand in the rug market, but if the price of rugs decreases, it will not have any effect on the quantity of demand for PCs.

The cross elasticity coefficient can be used, with certain caveats, to determine the industry boundary. High cross-elasticity of a product group suggests that the products belong to the same industry. The low cross-elasticity of one product relative to all other products indicates that it constitutes a separate industry. If, similarly, several products have high cross-elasticities among themselves, but low cross-elasticities with respect to other products, then this group of products may represent an industry. For example, different brands of televisions have high cross-elasticities with each other, but low cross-elasticities with other household products.

The main difficulties in determining industry boundaries using the cross-elasticity coefficient are as follows:

First, it is difficult to determine how high the cross-elasticity should be in a particular industry (for example, the cross-elasticity of frozen vegetables can be very high, but the cross-elasticity of frozen vegetables and dumplings can be quite low, so it is unclear whether we should talk about the frozen food industry or about two industries);
secondly, there is a chain of cross-elasticity (thus, between standard color and portable color TVs, on the one hand, and between portable color and portable black-and-white TVs, on the other, there is a high cross-elasticity. However, between standard color TVs and portable black-and-white -white cross-elasticity is rather weak).

Elasticity of supply

Price elasticity coefficient supply shows the degree of quantitative change in supply when the price changes by 1%.

The degree of change in the volume of supply depending on the change in price characterizes price elasticity of supply. The measure of this change is supply elasticity coefficient, calculated as the ratio of supply volume to price increases.

ΔS is the change in supply;
ΔP — change in the market price of the product;

Factors determining the elasticity of supply

The main factors determining the elasticity of supply are:

time period (instant, short-term, long-term)

for the instantaneous period, supply is inelastic;
for a short-term period, production can, within certain limits, adapt to changing prices;
for the long run, supply is elastic;

2. specificity of production (minimum amount of costs for expanding production);
3. storage possibilities for manufactured products;
4. the maximum possible production volume at full capacity utilization.

The study of elasticity of supply is a necessary condition for the study of the relative change in supply in accordance with the relative change in market price.

If the quantity supplied of a good remains unchanged for resale at any price, then inelastic supply occurs. When a small change in price causes supply to decrease to zero, and a small increase in price causes an increase in supply, then this situation characterizes a perfectly elastic supply.

Thus, the elasticity of supply changes under the influence of technological progress, changes in the qualitative and quantitative composition of the resources used, increasing the limited resources used in the production of a particular product, which leads to a decrease in the value of the elasticity of supply.

Conclusion

In its most general form, the demand (or supply) function for a product depends on a huge number of price and non-price determinants.

The elasticity of demand (or supply) with respect to any of the determinants characterizes the sensitivity of the quantity of demand (or supply) to a percentage change in this determinant, while other determinants are assumed to be constant.

Mathematically, this means that to determine elasticity at a point, it is necessary to find the partial derivative of the demand (or supply) function with respect to some determinant.

If there are a lot of them, then when the price of the main product changes, the demand for it will inevitably fall, since people will buy similar, but cheaper products. This situation indicates the elasticity of demand for a product, since the population can easily find a substitute. When determining the price of a manufactured product, you should take this indicator into account and be able to calculate the cross elasticity of demand, which expresses the relative change in demand for one product when the price of another, similar product changes.

Cross elasticity of demand is a certain indicator of the change in the quantity of a product purchased as a percentage relative to another product in the event of an increase/decrease in its price. The manufacturer of goods and services must take this indicator into account in order to adequately set the cost. If the product is elastic, then an increase in price will inevitably lead to a fall in demand and, as a result, losses or missed opportunities for profit.

Kinds

When calculating cross elasticity of demand, the indicator can be positive, negative or zero. A correct understanding of these coefficients allows you to more accurately determine the market price of a specific product or service provided:

Positive coefficient. If the value is above zero, this indicates good interchangeability of products, in which buyers (in the event of a price increase) will look for a cheaper analogue. The increased demand for an analogue may also provoke an increase in its cost. The better the goods can substitute for each other, the higher the cross elasticity of demand. An example is meat, when when the price of beef increases, the population switches to cheaper types of meat products.
Negative coefficient. If the resulting value is below zero, this indicates the complementarity of the goods, in which if the price of one of them increases, the cost of the other will inevitably increase. For example, an increase in flour prices will lead to an increase in the cost of confectionery products.
Zero coefficient. This value indicates that the price of one product is in no way related to the price of another, and therefore they do not depend on each other.

It is necessary to calculate the level of cross elasticity of demand in order to understand how profitable it is to produce and sell specific products. Before launching a new product into production, it is necessary to predict what the demand for it will be. Knowing the interest of buyers in products, as well as the availability of substitute goods on the market, the manufacturer can competently implement pricing policies.

By calculating the cross elasticity of demand, the manufacturer is able to set the optimal cost of its products, model consumer behavior in the market and calculate the number of products produced. All this enables the enterprise to develop strategic plans to extract maximum profit in the course of trade and economic activities and minimize its own risks.

Cross elasticity of demand characterizes the relative change in the volume of demand for one product when the price of another changes. The concept of cross elasticity of demand is used to determine the degree to which the quantity of demand for a given product is affected by changes in the price of another product.

The coefficient of cross price elasticity of demand is the ratio of the relative change in demand for the i-th product to the relative change in the price of the j-th product.

If EijD > 0, then goods i and j are called interchangeable (substitutes), an increase in the price of the j-th product leads to an increase in demand for the i-th (for example, different kinds fuel).

If EijD< 0, то товары i и j называют взаимодополняющими (комплементами), повышение цены j-того товара ведет к падению спроса на i-тый (например, автомашины и бензин).

If EijD = 0, then such goods are called independent; an increase in the price of one product does not affect the volume of demand for another (for example, bread and cement). Where Qi is the quantity of the i-th product, then Pj is the price of the j-th product.

If the price of a substitute product changes, the cross-elasticity coefficient will be greater than zero (for example, an increase in prices for beef meat will cause an increase in demand for poultry meat).

When the price of a complimentary product changes, the cross elasticity coefficient will be less than zero(for example, an increase in the price of gasoline leads to a decrease in the demand for cars).

Calculating the coefficient of cross price elasticity of demand allows you to answer by how many percent the quantity of demand for product A will change if the price of product B changes by one percent. Calculating the cross-elasticity coefficient makes sense primarily for substitute and complementary goods, since for weakly interrelated goods the value of the coefficient will be close to zero.

Let's remember the example of the chocolate market. Let's say we also conducted observations of the halva market (a product that is a substitute for chocolate) and the coffee market (a product that is a complement to chocolate). Prices for halva and coffee changed, and as a result, the volume of demand for chocolate changed (assuming all other factors remain unchanged).

Using the formula, we calculate the values of the coefficients of cross price elasticity of demand. For example, when the price of halva is reduced from 20 to 18 den. units demand for chocolate decreased from 40 to 35 units. The cross elasticity coefficient is:

Thus, with a decrease in the price of halva by 1%, the demand for chocolate in a given price range decreases by 1.27%, i.e. is elastic relative to the price of halva. Similarly, we calculate the cross elasticity of demand for chocolate with respect to the price of coffee if all market parameters remain unchanged and the price of coffee decreases from 100 to 90 deniers. units:

Thus, when the price of coffee decreases by 1%, the quantity of demand for chocolate increases by 0.9%, i.e. The demand for chocolate is inelastic relative to the price of coffee. So, if the coefficient of elasticity of demand for good A with respect to the price of good B is positive, we are dealing with substitute goods, and when this coefficient is negative, goods A and B are complementary. Goods are called independent if an increase in the price of one good does not affect the amount of demand for another, i.e. when the cross elasticity coefficient is zero. These provisions are only valid for small price changes. If price changes are large, then the demand for both goods will change under the influence of the income effect. In this case, products may be incorrectly identified as complements.

The value of the cross-elasticity coefficient depends on whether the goods are considered interchangeable or complementary. If the goods are substitutes, the cross elasticity coefficient will be positive. Thus, a rise in the price of butter will cause an increase in demand for margarine, a decrease in the price of Borodino bread will lead to a reduction in demand for other types of black bread. If the goods are complementary, such as gasoline and cars, cameras and film, the quantity demanded will change in the direction opposite to the change in prices, and the elasticity coefficient will be negative.

Rice.

By measuring cross elasticity, one can determine whether the selected goods are complementary or substitutable and, accordingly, how a change in the price of one type of product produced by a firm can affect the demand for other types of products of the same firm. Such calculations will help evaluate decisions on changes in prices for manufactured products.

Cross elasticity is widely used in antitrust policy: evidence that a company is not a monopolist of a particular product is the fact that the product produced by this company has a positive cross elasticity of demand with the product of another company.

Elasticity of demand characterizes the degree of response of demand to the action of any factor. Depending on the type of factor affecting demand, there are price elasticity of demand, income elasticity of demand and cross elasticity of demand.

The elasticity of demand directly depends on changes in influencing factors. Certain changes cause changes in the consumption of goods and services, and this indicates the elasticity of demand, and if the factors affecting demand do not cause significant changes directly in market demand, then there is no elasticity of demand. If demand does not change when the price of a product increases, then it is inelastic. If the changes exceed the price changes, then demand is elastic. The elasticity of demand significantly affects the income of the enterprise producing goods. If it is less than one, then with an increase in the price of a product, income increases, but if it is greater than one, then an increase in the price of a product negatively affects the level of income. Economists use the elasticity of demand to measure the sensitivity of consumers to changes in the price of a product. If small changes in price lead to large changes in the quantity purchased, then such demand is called relatively elastic or simply elastic. If a significant change in price leads to a small change in the number of purchases, then such demand is relatively inelastic or simply inelastic.

Elasticity of demand - change in demand for a given product under the influence of economic and social factors related to price changes; demand can be elastic if the percentage change in its volume exceeds the decrease in the price level, and inelastic if the rate of price decrease is greater than the increase in demand.

Price Elasticity of Demand

As already defined above, the level of market demand for a product depends primarily on the selling price. However, for each individual product, the dependence of a change in the volume of demand on a change in the price level may be different. And often it is important to determine not the absolute volume of demand, but its reaction to price changes.

Measuring the dependence of a change in the volume of demand on a change in price requires the introduction of the concept of elasticity as an indicator of the degree of influence of one variable on another. In mathematics, elasticity is understood as the ratio of the growth rate of the dependent variable to the growth rate of the independent variable. Traditionally, for the purposes of its measurement, elasticity coefficients of different types are used. The economic meaning of the elasticity coefficient is that it shows by how many percent the dependent variable (in this case, the volume of demand) will change when the independent variable changes by one percent. The latter may be the price of a given product, the prices of other goods, the level of income, etc.

This concept was first explored in its application to economics by A. Marshall in 1881 -1882.

Data on the elasticity of demand are necessary when making decisions on price revisions, its direction and the degree of changes in prices for individual goods. This allows for a reasonable pricing policy, both from the point of view of commercial benefits and increasing the population. The use of this data makes it possible to identify the consumer’s reaction to price changes, prepare production for changes in demand, and regulate the market.

Information about the elasticity of demand can also be used when setting the level of the commodity tax (), making decisions on the appropriate marketing policy of an enterprise or firm, and conducting various operations on foreign market(export-import transactions, transactions with exchange rates, etc.).

The coefficients of price elasticity of demand are divided into several types: the coefficient of direct price elasticity of demand, the coefficient of cross price elasticity of demand, and the coefficient of income elasticity of demand.

Demand elasticity coefficient

An example of calculating the elasticity coefficient. As a result of a reduction in the price of goods from 5,000 rubles. up to 4,800 rub. demand increased from 10,000 pcs. up to 11,000 pcs. The elasticity coefficient is -2.35:

ES = (1,000 / (-200)) x ((5,000+4,800) / 2) / ((10,000+11,000) / 2) = -2.35

This product belongs to the classic ones and the demand for it is highly elastic: a decrease in price by 1% leads to an increase in demand by 2.35%.

The advantage of the elasticity coefficient is its ease of calculation. However, this is precisely its drawback. When defining elasticity, an important caveat is made: “other things being equal.” In order to minimize this disadvantage, you can calculate the cumulative impact of several indicators on the amount of demand.

For example, the price elasticity of demand for a certain product is -0.5; demand by income (the coefficient of elasticity of demand by income is calculated similarly to the price coefficient ES = (D K / Ksr) / (D D / Dsr), where D is consumer income) - 0.8. Let us determine by what percentage the volume of demand for a given product will change if its price decreased by 10% and consumer income increased by 20%:

(-0.5)x(-10%) + 0.8 x 20% = 21%.

The combined influence of price factors and changes in income led to an increase in demand by 21%.

Another situation. The rise in price of natural fur leads to a decrease in sales and a shift in demand for products made from faux fur.

Elasticity coefficient of demand for natural fur its price is -1.9. When the demand for real fur decreases by 1%, artificial fur increases by 0.9%. Let's calculate the dependence of demand for faux fur products on prices for natural fur:

(-1.9)x(-0.9) = 1.71.

Thus, an increase in prices for real fur by 1% will cause an increase in sales of faux fur products by 1.71%.

When analyzing the consequences of price changes, it is necessary to distinguish between short-term and long-term elasticity coefficients. The short-term elasticity coefficient is based on information obtained during the year, the long-term elasticity coefficient is based on information obtained over a period of more than a year.

The short-term coefficient of price elasticity of demand exceeds the long-term one, as a rule, for durable goods (Fig. 6). Such products are used to replace items used in the household. The total consumer supply significantly exceeds the annual production volume. Consequently, with a sharp rise in prices, the consumer can refuse to purchase durable goods without any noticeable discomfort. However, after a while, there is an urgent need to replace a worn-out or out-of-fashion item. household appliances, furniture, etc. This leads to a relative recovery in sales volumes.

As practice shows, it is precisely these curves that most accurately reflect the average sensitivity of buyers to price changes. Therefore, after conducting multiple studies of consumer reactions to price changes and determining the most reliable elasticity coefficients, it is desirable to construct a demand curve with a given elasticity value along its entire length.

The most reliable value of demand elasticity is obtained by calculating the elasticity coefficient at a point close to the equilibrium point. The classification of markets and goods is thus determined by what the characteristics of demand are at the equilibrium point, the point of intersection of supply and demand. This is precisely the purpose of using the arithmetic average values of demand and price in the formula for the elasticity coefficient:

ES = (K / ((K1+K2) / 2)) / (C / ((C1+C2) / 2))

One of the varieties of the demand elasticity coefficient - the cross coefficient - allows you to outline the product (commodity) boundaries of the market that determine.

The definition of product boundaries of the market is based on the concept of equivalence or interchangeability of goods that make up one product group. Substitutability can be calculated using the cross price elasticity of demand:

EShu = (Kx / Ksrkh) / (Tsu / Tssru),
where Kx is the change in demand for product X;
Tsu - change in the price of goods Y;
Ksрх - demand for product X;
Tssru - the price of goods U.

Absolute values demand and prices are determined as arithmetic averages.

In addition to the quantitative characteristic of the elasticity of demand for product X (low elastic, highly elastic), the cross elasticity coefficient carries important information about the interconnectedness of the selected goods:

If EShu > 0, then goods X and Y are interchangeable; the higher the elasticity coefficient, the higher the degree of interchangeability;
if EShu
Let us highlight the main factors that determine the level of elasticity of demand:

The more substitute goods there are in the market, the higher the elasticity of demand. When the price of one product rises, the demand for it drops sharply, since it is possible to purchase another, similar product.
Luxury goods have high elasticity, while essential goods have low elasticity.
The higher the share of the budget that falls on the purchase of a given product, the higher the elasticity (this applies to all goods except essential items).
The elasticity of demand decreases as money income increases.
The stability of consumer behavior contributes to a decrease in elasticity.
To what extent are the needs satisfied? this product the higher the elasticity.

The use of the elasticity coefficient in assessing the consequences of price changes for the financial and economic position of an enterprise, taking into account cost differentiation, is illustrated in the following example.

The elasticity of demand from prices for the products of the Beta enterprise is 1.75. Let us determine the consequences of reducing the price by 100 rubles, if before this reduction the sales volume was 10,000 units. at a price of 1,750 rubles/piece, and the total were equal to 10,000,000 rubles. (including permanent ones - 2,000,000 rubles) for the entire production volume.

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