Relationship between demand price elasticity and total sales revenue:

The demand price elasticity coefficient is closely related to the seller's income:

If the demand price elasticity coefficient is less than 1, the sales revenue will increase when the price rises;

if the elasticity coefficient of demand price is greater than 1, the sales revenue will decrease when the price rises, and increase when the price falls;

the elasticity coefficient of demand price is equal to 1, and the price change will not cause the change of sales revenue.

application of demand price elasticity theory: analysis of the relationship between demand price elasticity and income.

total revenue can also be called total revenue, which refers to the total revenue obtained by a manufacturer from selling a certain amount of goods, that is, the product of sales volume and price. The demand for low-grade goods (inferior products) decreases with the increase of income. The income elasticity of demand of low-grade goods is negative, the income increases, the demand for low-grade goods decreases, and the demand for higher-grade substitutes turns.

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income elasticity of demand

The demand elasticity of ordinary commodities is positive, with the increase of income and the increase of demand for ordinary commodities. If the income elasticity of demand of a commodity is less than 1, it is a necessity. If the income elasticity of demand of a commodity is greater than 1, it is a luxury or high-end commodity.

a value of 1 in income elasticity of demand means that the income will increase and the demand will remain unchanged. This commodity is sticky.

income elasticity of demand is often used as an indicator of healthy economic operation and expected consumption pattern, and it is also the guidance of investment decision-making of enterprises. For example, the "elasticity of alternative income" listed below shows that the proportion of consumers' budget for automobile and catering consumption is higher, while the share of tobacco and butter consumption is less.

income elasticity of demand is closely related to the income distribution of people, and also closely related to the sales ratio of a commodity among buyers of different income classes. Especially when the income of buyers of a certain income class increases, their purchase of a certain commodity changes to match that of the new income class. If income share elasticity is defined as the negative percentage of personal income growth, after calculation, income elasticity will become the expected value of income share elasticity with the income distribution of product buyers. When the income presents a gamma distribution, the income elasticity of a commodity is directly proportional to the percentage difference between the average income level of the commodity buyer and the average income of the total population.

Other explanations

1. When the income level of consumers changes by 1%, the percentage of demand for a certain commodity changes. It measures the sensitivity of the demand of a commodity to the change of income level.

2. Measure the degree to which consumers demand for products changes due to income changes. Expressed by the income elasticity coefficient e. For different products, the income elasticity coefficient is different. Even for the same product, its income elasticity coefficient can vary with different income classes and regions. Therefore, it is more correct to collect the average income levels of different income classes in different regions and analyze them. From the national statistics, we can analyze the increase or decrease of consumption of some consumer goods when the per capita income increases by 1%.