Define demand elasticity and then explain cross, price and demand elasticity in decisions in management. (500 words)

Define demand elasticity: Demand elasticity refers to the dynamic measurements of the relative degree of change in the quantity demanded of the commodity for positive or negative price change. Presentation of the ratio of relative changes that occur to quantity demanded after the price went through a shift.

- Explain cross elasticity: Instruction that indicates cross elasticity of demand is the extent of which the demand for one product responds to the price change of the considerably related product. A positive cross elasticity between the two products means that the latter pair of products are substitutes to each other. Cross elasticity is negative in this case, which means they are compatible items. Mangers can use cross elasticity to forecast the reaction of the demand for their own products at the chance of price changing for related ones.

- Explain price elasticity: Price elasticity of demand represents the personified fraction of the total amount demanded in relation to a given price. Inelastic demand does not react the price changes very much, while elastic does because it is very sensitive to price changes. Managers can use price elasticity to evaluate whether changes of prices will affect the revenues.

- Explain income elasticity: Income elasticity of demand is a parameter which evaluates how demand varies for different change levels in consumers' income. Non-inferior goods display positive income elasticity, but inferior goods do the oppositional. Demand growth forecasts are based on expected consumer income changes. Managers are able to forecast these.

- Discuss importance for managerial decisions: The comprehension of these elasticity is an essential factor in manager's choice of the optimal pricing strategies, forecasts as well as the total revenue and profits. Managers need to not only to consider substitutes, but also, consumer incomes, market saturation, and other things depending on the elasticity.
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