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Chapter 5: Q. 11 (page 130)

What is the price elasticity of demand? Can you explain it in your own words?

Short Answer

Expert verified

Price elasticity refers to how a product's quantity demanded or supplied responds to price changes.

Step by step solution

01

Step 1. Introduction

According to the law of demand, a negatie relationship exists between quantity demanded and price for normal goods.

02

Step 2. Explanation

Price elasticity of demand refers to the extent by which the quantity demanded is influenced by a chnage in price. It is calculated as a percentage change in quantity demanded — or supplied — divided by the percentage change in price.

Priceelasticityofdemand=%∆quantitydemanded%∆price

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