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Explain the price elasticity of demand.

Asked by Topperlearning User 25th April 2016, 10:00 AM
Answered by Expert
Answer:

Price elasticity of demand for a good is defined as the percentage change in demand for a good divided by the percentage change in its price.

Price elasticity of demand is a pure number and it does not depend on the units in which the price of the good and the quantity of the good are measured.

Price elasticity of demand is a negative number as the demand for a good is negatively related to the price of a good.

i. At a particular price, the percentage change in demand for a good is less than the percentage change in price and then the demand for the good is inelastic at that price.

ep <1

ii. At a particular price, the percentage change in demand for a good is equal to the percentage change in price and then the demand for the good is unitary elastic at that price.

ep =1

iii. At a particular price, the percentage change in demand for a good is greater than the percentage change in price and then the demand for the good is elastic at that price.

ep >1

Answered by Expert 25th April 2016, 12:00 PM
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