Essay on Questions On Price Elasticity Of Demand

1093 Words Nov 26th, 2016 5 Pages
Price elasticity of demand is a measure of the responsiveness of quantity demanded to a change in price (Sloman, Hinde, Garratt, 2013, p. 64). The elasticity or the responsiveness of demand to a change in price is measured using the formula:
E= Percentage change in quantity demanded Percentage change in price (Begg, Ward, 2007, p.34)
With the numerical data provided from this formula a description can be formed:
Percentage change in price. Percentage change in demand. Numerical calculations Elasticity Value Description
10 0 0=0 10
E = 0 Perfectly inelastic
10 5 ½ = 5 10
E < 1 Inelastic demand 10 10 1= 10 10 E = 1 Unit Elasticity
10 20 2=20 10 E > 1 Elastic Demand
10 Infinitely Large E = - Perfectly Elastic
(Begg,Ward,2007,p.35)
These have their own definitions and have different impacts upon business in certain contexts. Elastic is when a change in price causes a proportionately larger change in the quantity demanded. In terms of being inelastic, it is when a change in price causes a proportionately smaller change in the quantity demanded. Thirdly, unit elasticity is when the quantity demanded changes proportionately the same as the price (Sloman, Garratt, Guest, Jones, 2013, p. 70).

For businesses, price elasticity of demand is very important depending on the product they produce and sell. When it comes to a product that has many…

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