Price Elasticity Of Demand
Sure, here is a definition of price elasticity of demand:
Price elasticity of demand: The price elasticity of demand measures the responsiveness of quantity demanded to changes in the price of a good. It is calculated by the percentage change in quantity demanded divided by the percentage change in the price.
The price elasticity of demand is a measure of the sensitivity of demand to changes in price. It is a measure of how much the quantity demanded changes when the price changes. If the quantity demanded increases when the price increases, the demand is said to be inelastic. If the quantity demanded decreases when the price increases, the demand is said to be elastic.
The price elasticity of demand is an important concept in economics because it helps economists understand how consumers will respond to changes in the price of a good. This information can be used to help businesses make decisions about how to price their products.
Here are the key factors that affect the price elasticity of demand:
- Availability of substitutes: If there are many substitutes for a good, then demand for that good will be more elastic.
- Importance of the good: If a good is very important to consumers, then demand for that good will be less elastic.
- Proportion of income spent on the good: If a good is a large proportion of consumers’ income, then demand for that good will be more elastic.
The price elasticity of demand is a powerful tool for understanding how consumers will respond to changes in the price of a good. It is an important concept in economics that can be used to help businesses make informed decisions about how to price their products.
