Price elasticity of demand
Price elasticity of demand is the responsiveness of demand due to
changes in price. It is the proportionate change in quantity demanded to the proportionate change in price.
changes in price. It is the proportionate change in quantity demanded to the proportionate change in price.
Price elasticity of demand is derived from the demand curve, which
shows the absolute quantity demanded as a function of price. Since the rate of demand rises as the price falls, and vice-versa, the price elasticity of demand is actually negative, except that it is common to ignore the algebraic sign and use the absolute value. It is common to write (sp) = 1.23 instead of (ep) = -1.23. Price elasticity of demand ranges from 0 to infinity. It can be elastic, inelastic, unitary, perfectly elastic and perfectly inelastic.