The next variable that is seen for elasticity is X which is the price of the competitor. In this case, the elasticity would be .
ΔQ/δX which would be the partial derivative in terms of X. The results would cause the elasticity to be 20 P meaning that any change in competitor's price is dependent on the price of the product itself. If the price of the product is 20 cents, then any change in the competitor's price would lead to a positive change in quantity of product by 400 units. The next independent variable see in I where I is the per capital income of the area. The elasticity then becomes .
ΔQ/δI where any change in quantity is seen as a partial derivative in terms of I (Varian and Norton, 1992). The elasticity becomes 5.2 only which means that for every unit change in the income for the people, quantity would rise by 5.2 units. The next independent variable analyzed is A which represents the monthly advertising expenditure of the company. The elasticity becomes the partial derivative of ΔQ/δA and it shows that for every unit change in advertising, the value of quantity rises by .2 units. The last independent variable analyzed is the number of microwaves ovens sold in the areas and the elasticity of this variable is the partial derivative of quantity and microwaves (Baumol and Hall, 1977). ΔQ/δM shows the elasticity which states that for every extra microwave sold, the quantity rises by 25 units. These elasticities are more apparent in the short run as short term changes cause fluctuations in these variables. In the long run, elasticities can change and become much more constant causing lesser effect on the change in quantities. This implies that in the short run, the company can look to change the prices as the competitors prices are nullifying any impact caused by its elasticity (Ney, 1990). This means that the company can use its price to effect demand and lead to higher revenues.
