Define elasticity of demand explain the various methods of measuring elasticity of demand
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The price elasticity of demand measures the responsiveness of percentage change in price to percentage change in quantity demanded. There are three popular methods for measuring price elasticity of demand named Straight line method, Outlay method and Arc elasticity.
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The price elasticity of demand is measured by its coefficient Ep. This coefficient Ep measures the percentage change in the quantity of a commodity demanded resulting from a given percentage change in its price: Thus. Where q refers to quantity demanded, p to price and ∆ to change. If Ep> 1, demand is elastic.
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