ABSTRACT
This chapter includes two topics of particular importance to livestock marketing: elasticities and market equilibrium, both of which are often troublesome to grasp completely. While livestock marketing is very much a practical pursuit, a foundation in economic principles is nevertheless helpful for an understanding of the economic environment in which the system operates. Consumers are the basic decision makers in a market economy. The readiness with which consumers make these adjustments is the "elasticity." Although this term is commonly employed, there are actually three forms which should be differentiated: the so-called price cross, and income elasticities of demand. Thus, price elasticities of demand vary from zero to infinity. The significance of products with inelastic price elasticities of demand and variable supplies is clear: prices will be very unstable. The most significant use of cross demand elasticities is for substitute goods. Empirical economists have devised means of estimating the short- and long-run elasticities.
