Saturday, July 28, 2018

Computing the Price Elasticity of Demand

                                      Price Elasticity of Demand
Change in the quantity demand of a product due to the change in its price is known as the elasticity of demand.
      Demand for a good is said to be elastic if the quantity demanded response more to slight changes in price and if the demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price.

Computing the Price Elasticity of Demand
Price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price.

For example, there is a 10% increase in the price of an ice cream cause the amount of ice cream you by to fall by 30%.

Price elasticity of demand= 30/10
                 
  Elasticity of demand           = 3

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