Question

What do you understand by price elasticity of demand? With the help of a diagram explain the
condition when
1) Ed> 1 2) Ed<1 3) Ed=1

Answer 1

Explanation:

-If the price elasticity of demand is lower than 1, a rise in price causes an increase in revenue for the seller. -If the price elasticity of demand equals 1, a rise in price causes no change in revenue for the seller. - If elasticity is greater than 1 and the supply curve shifts to the left, price will rise.