Micro Economics Cross Categiory Analysis

Question: Describe about the Micro Economics for Cross Categiory Analysis. Answer: Discussion Price elasticity of a good can be described as effect of change in price on the demand for that particular good. As per the law of demand, customers tend to purchase less when the price of the product rises (Walras, 2013). Thus, increase in price decreases the demand of the product. A good can be elastic or inelastic in nature depending upon the change in demand due to the change in price. A good having price elasticity have higher percentage change in demand than the percentage change in the price. On the other hand, a good is price inelastic when the percentage change in demand is lower than the percentage change in its price (Stlouisfed.org. 2016). One of the examples of the elastic good and inelastic good for the household is motor vehicles and electricity respectively. Motor vehicle can be considered as an elastic good as the customers tends to reduce the demand for the product when its price increases. The good is not a necessary good and thus, people tend to consume less when the price increases (Gordon, Goldfarb Li, 2013). On the other hand, electricity is a necessary commodity and thus do not affect the demand much when the price changes. References Gordon, B. R., Goldfarb, A., Li, Y. (2013). Does price elasticity vary with economic growth? A cross-category analysis.Journal of Marketing Research,50(1), 4-23. Stlouisfed.org,. (2016).Elasticity of Demand, Economic Lowdown Podcast Series | St. Louis Fed Education Resources.Stlouisfed.org. Retrieved 27 November 2016, from https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-16-elasticity-of-demand Walras, L. (2013).Elements of pure economics. Routledge.