draw diagram when e>1 in economics
Answers
Answer:
The price elasticity of demand (PED) measures the change in demand for a good in response to a change in price.
LEARNING OBJECTIVES
Define the price elasticity of demand.
KEY TAKEAWAYS
Key Points
The PED is the percentage change in quantity demanded in response to a one percent change in price.
The PED coefficient is usually negative, although economists often ignore the sign.
Demand for a good is relatively inelastic if the PED coefficient is less than one (in absolute value).
Demand for a good is relatively elastic if the PED coefficient is greater than one (in absolute value).
Demand for a good is unit elastic when the PED coefficient is equal to one.
Key Terms
elastic: Demand for a good is elastic when a change in price has a relatively large effect on the quantity of the good demanded.
Unit Elastic: Demand for a good is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.
inelastic: Demand for a good is inelastic when a change in price has a relatively small effect on the quantity of the good demanded.
The price elasticity of demand (PED) is a measure that captures the responsiveness of a good’s quantity demanded to a change in its price. More specifically, it is the percentage change in quantity demanded in response to a one percent change in price when all other determinants of demand are held constant.
The formula for the coefficient of PED is:
PED=%changeinquantitydemanded%changeinpricePED=%changeinquantitydemanded%changeinprice
The law of demand states that there is an inverse relationship between price and demand for a good. As a result, the PED coefficient is almost always negative. However, economists tend to ignore the sign in everyday use. Only goods that do not conform to the law of demand, such as Veblen and Giffen goods, have a positive PED.