Economics Elasticity Of Demand Questions Medium
The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. The formula for price elasticity of demand is:
Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
To calculate the percentage change in quantity demanded, you subtract the initial quantity demanded from the final quantity demanded, divide it by the initial quantity demanded, and multiply by 100. Similarly, to calculate the percentage change in price, you subtract the initial price from the final price, divide it by the initial price, and multiply by 100.
Once you have the percentage changes in quantity demanded and price, you can substitute them into the formula to calculate the price elasticity of demand. The resulting value will indicate the responsiveness of quantity demanded to changes in price. If the price elasticity of demand is greater than 1, it is considered elastic, meaning that quantity demanded is highly responsive to price changes. If it is less than 1, it is considered inelastic, indicating that quantity demanded is not very responsive to price changes. And if it is equal to 1, it is considered unitary elastic, meaning that quantity demanded changes proportionally to price changes.