Economy, asked by samsir3283, 1 year ago

Explain the significance of' minus sign' attached to the measure of price elasticity of demand in case of a normal good, as compared to the 'plus sign' attached to the measure of price elasticity of supply

Answers

Answered by agarwalanant561
6

The "minus" sign is attached to the measure of Price elasticity of Demand as Price of the commodity and quantity demanded have a negative relationship, as specified in the Law of Demand.

The Law of demand states that there exists an inverse relationship between price and quantity demanded i.e.  other things remaining constant, as the price falls, the quantity demanded of the commodity rises and vice versa.

Hence the negative or minus sign is attached to the formula of price elasticity of demand.

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The "plus" sign is attached to the measure of Price elasticity of supply as Price of the commodity and quantity supplied have a positive relationship, as specified in the Law of Supply.

The Law of Supply states that other things remaining constant, the quantity supplied increases with increase in the own price of the commodity and vice versa. Hence, there exists a direct relationship of quantity supplied and own price.

Hence the positive or plus sign is attached to signify the direct and positive relationship of price and quantity supplied.

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