PRICE ELASTICITY OF DEMAND

PRICE ELASTICITY OF DEMAND:

                     Price elasticity of demand is defined as the percentage change in the quantity demanded divided by the percentage change in the price.

 Price elasticity of demand (ped) = Percentage change in the quantity demanded / Percentage change in price.

Example: Suppose if there is 20 percent increase in price of cold drinks then the demand for the cold drinks will fall by 40 percent. Then elasticity of demand is

Price elasticity of demand = 40 percent /20 percent=2

Then the elasticity for this example is 2.

If the price elasticity of demand for a product is <-1 then it is price elastic.

If the price elasticity of demand for a product is 0 to -1 then it is price inelastic.

• ·         The price elasticity of demand for fish in India is -0.484. it means, if price of fish in India is increased by 100% then their demand falls to -0.484%.