- Created by: April15
- Created on: 29-01-20 10:35
Price elasticity of demand
Price elasticity of demand is a measure of the responsiveness of demand to a change in price. It can be calculated using the following formula:
% change in quantity demanded
% change in price
- Since a price rise will cause demand to fall and a price fall will cause demand to increase, price elasticity of demand is always negative.
- If the percentage change in demand is greater than the percentage change in price, demand is said to be PRICE ELASTIC.
- If the percentage change in demand is less than the percentage change in price, demand is said to be PRICE INELASTIC.
- If the percentage changes in demand and price are the same, demand is said to be of unit elasticity.
- If demand for a good is price…