Economics Supply And Demand Questions
The concept of elasticity of demand refers to the responsiveness or sensitivity of the quantity demanded of a good or service to changes in its price. It measures the degree to which the demand for a product changes in response to a change in its price. Elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the demand is elastic, a small change in price will result in a relatively larger change in quantity demanded. On the other hand, if the demand is inelastic, a change in price will have a relatively smaller impact on the quantity demanded. The concept of elasticity of demand is important for businesses and policymakers as it helps in understanding consumer behavior and making pricing decisions.