Essay On Price Elasticity

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Elasticity is a measure of how one variable changes in response to another. Elasticity of demand or supply is the degree of responsiveness of demand or supply respectively to changes in price. Therefore, price elasticity of demand is the percentage change in quantity demanded of a good/service divided by the percentage change in price. The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

If a slight change in price causes a big change in quantity demanded/supplied then demand or supply is said to be elastic, and the elasticity is greater than one. If, a fairly considerable change in price make little difference to the quantity demanded/supplied elasticity is less than one, …show more content…

11.765/-18.18 =-0.65
The answer is 0.65.
The formula uses the same base for both of the cases, giving the same elasticities between two points regardless of a price increase or decrease which is an advantage of using the midpoint method.
The price elasticity of demand would be a negative number since quantity demanded and price always move in opposite directions.
For simplicity, however, elasticity of demand is typically expressed in absolute terms (without the minus sign). The price elasticity of demand is said to decline as price move down along the demand curve.
References:
The Economy Today, Twelfth Edition, Bradley R. Schiller, McGraw-Hill International Edition.
OpenStax Economics, Principles of Economics. OpenStax CNX. May 18, 2016. Retrieved from http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

26. The law of demand states that higher prices results in lower quantity demanded. Negative numbers of elasticities of demand shows that the demand curve is downward sloping but are read as absolute values. As we move up along the demand curve, the magnitude of elasticity increases in absolute values. Price elasticity of demand changes along a straight-line demand curve at different …show more content…

In the case of a vertical demand curve, Increase in price does not affect the quantity demanded. This is complete inelastic demand, consumers pay any price to get the quantity. Elasticities of demand obey the law of demand meaning that elasticities of demand for goods and services ie between these two extremes in real life. The slope indicates the rate of change in units along the curve. At the upper end of the demand curve, where the price is high and the quantity demanded is low, a small change in the quantity demanded even in, say, one unit, is pretty big in percentage

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