question archive What is the price elasticity of demand and how do you interpret an elasticity value?
What is the price elasticity of demand and how do you interpret an elasticity value?
Subject:EconomicsPrice:2.88 Bought3
What is the price elasticity of demand and how do you interpret an elasticity value?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
The price elasticity of demand is the ratio of the percentage change in the demand of a product divided by the percentage change in the price of the product.
A value of more than 1 means that demand is relatively elastic and a percentage change in price is met with a higher percentage change in demand.
A value of less than 1 means that demand is relatively inelastic and a percentage change in price is met with a lower percentage change in demand.
A value of 1 means that the demand and price show exact percentage changes when price changes.
A value of 0 means that the demand is perfectly inelastic and the same number of units is demanded at all prices.
A value of infinity means that if the price increases, no units will be demanded in the market.
