write a half page bibliography on price elasticity of demand
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Price elasticity of demand (or elasticity), is the degree to which the effective desire for something changes as its price changes. In general, people desire things less as those things become more expensive. However, for some products, the customer's desire could drop sharply even with a little price increase, and for other products, it could stay almost the same even with a big price increase. Economists use the term elasticity to denote this sensitivity to price increases. More precisely, price elasticity gives the percentage change in quantity demanded when there is a one percent increase in price, holding everything else constant.
Price elasticities are almost always negative, although analysts tend to ignore the sign even though this can lead to ambiguity. Only goods which do not conform to the law of demand, such as Veblen and Giffen goods, have a positive elasticity. In general, the demand for a good is said to be inelastic (or relatively inelastic) when the elasticity is less than one (in absolute value): that is, changes in price have a relatively small effect on the quantity of the good demanded. The demand for a good is said to be elastic (or relatively elastic) when its elasticity is greater than one.
Revenue is maximised when price is set so that the elasticity is exactly one. The good's elasticity can also be used to predict the incidence (or "burden") of a tax on that good. Various research methods are used to determine price elasticity, including test markets, analysis of historical sales data and conjoint analysis. Price elasticity of demand further divided into: Perfectly Elastic Demand (∞), Perfectly Inelastic Demand ( 0 ), Relatively Elastic Demand (> 1), Relatively Inelastic Demand (< 1), Unitary Elasticity Demand (= 1).
The variation in demand in response to a variation in price is called price elasticity of demand. It may also be defined as the ratio of the percentage change in quantity demanded to the percentage change in price of particular commodity.[1] The formula for the coefficient of price elasticity of demand for a good is:[2][3][4]
{\displaystyle e_{\langle p\rangle }={\frac {\mathrm {d} Q/Q}{\mathrm {d} P/P}}}e_{{\langle p\rangle }}={\frac {{\mathrm {d}}Q/Q}{{\mathrm {d}}P/P}}
where P is the price of the demanded good and Q is the quantity of the demanded good. In other words, we can say that the price elasticity of demand is the change in demand for a commodity due to a given change in the price of that commodity.
The above formula usually yields a negative value, due to the inverse nature of the relationship between price and quantity demanded, as described by the "law of demand".[3] For example, if the price increases by 5% and quantity demanded decreases by 5%, then the elasticity at the initial price and quantity = −5%/5% = −1. The only classes of goods which have elasticity greater than 0 are Veblen and Giffen goods.[5] Although the elasticity is negative for the vast majority of goods and services, economists often refer to price elasticity of demand as a positive value (i.e., in absolute value terms).[4]
This measure of elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.e., the elasticity of demand with respect to the good's own price, in order to distinguish it from the elasticity of demand for that good with respect to the change in the price of some other good, i.e., a complementary or substitute good.[1] The latter type of elasticity measure is called a cross-price elasticity of demand.[6][7]