Acta Univ. Agric. Silvic. Mendelianae Brun. 2012, 60(2), 379-382 | DOI: 10.11118/actaun201260020379

Physical and expenditure formulations of demand functions and evaluations of price demand elasticity

Pavel Syrovátka

Ústav ekonomie, Mendelova univerzita v Brně, Zemědělská 1, 613 00 Brno, Česká republika

Studies of the demand relations on the consumer markets bring much useful information. The concept of the elasticity coefficients is frequently used for the quantitative analysis of the demand sensitivity. Formulation of the investigated demand functions is very important for the evaluation of the demand elasticity. Within net consumer demand (consumer purchase), it is possible to differentiate the physical and expenditure forms of the demand functions. The paper is focused on the theoretical and methodological backgrounds of the evaluation of price-demand elasticity under the physical and expenditure definitions of the demand relationships. In this paper, the relationship between the coefficient of the price elasticity of demand in the physical form and the coefficient of the price elasticity of demand in the expenditure form is determined and studied. The derived formula is tested using the USDA database.

Keywords: consumer demand, physical form of demand, expenditure form of demand, price-demand elasticity, price-expenditure elasticity

Grants and funding:

The paper was prepared within the Research Plan of the Faculty of Business and Economics, Mendel University of Agriculture and Forestry, MSM 6215648904 Czech Economy in Integration and Globalisation Processes and Development of the Agricultural Sector and Services Sector under the New Conditions of the Integrated Agrarian Market as a Part of Solving the Thematic Specialisation 4 "Development Trends in Agribusiness, Formation of Segmented Markets within Commodity Chains and Food Networks in the Process of Integration and Globalisation and Change of Agrarian Policy".

Received: November 30, 2011; Published: October 3, 2013  Show citation