Elasticity of Resource Demand

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Elasticity of Resource Demand refers to the relative change of resource demand caused by changes in resource price.

E_rd= percentage change in resource quantity
percentage change in resource price

* 3 main determinants

Ease of Resource Substitutability

High # of substitutes = ELASTIC resource demand
Low # or no substitutes = INELASTIC resource demand

Elasticity of Product Demand

DERIVED resource elasticity from product
High product elasticity = high resource elasticity
Low product elasticity = low resource elasticity

Ratio of Resource Cost to Total Cost

Large proportion of total cost = High elasticity
Small proportion of total cost = Low elasticity

1 Comments Show recent to old

fourth.tegra@yahoo.com, 378 - days ago

I thank you so much for this great information :)