Elasticity of Demand Analysis for Bar Soaps of DSIL
What is the demand function for bar soaps of DSIL and how can we calculate the elasticity of demand for this product?
Demand Function for Bar Soaps of DSIL
QX = 15000 – 3000PX + 7Y + 300PC
Where:
QX = Quantity of Bar Soaps demanded for DSIL
PX = Price charged by DSIL
PC = Price of related product
Y = Per capita income of the consumers
Calculating Elasticity of Demand
Price Elasticity of Demand (PED):
The formula for price elasticity of demand is: PED = % change in quantity demanded / % change in price.
By substituting the given values of price and calculating the quantity demanded at different price levels, we can find the price elasticity of demand for bar soaps of DSIL.
Income Elasticity of Demand (IED):
The formula for income elasticity of demand is: IED = % change in quantity demanded / % change in income.
By substituting the given values of per capita income and calculating the quantity demanded at different income levels, we can find the income elasticity of demand for bar soaps of DSIL.
Cross Elasticity of Demand (CED):
The formula for cross elasticity of demand is: CED = % change in quantity demanded of bar soaps / % change in the price of the related product.
By substituting the given values of the price of the related product and calculating the quantity demanded at different price levels of the related product, we can find the cross elasticity of demand for the bar soap of DSIL.