Price Elasticity of Demand

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…