Price elasticity

PRICE ELASTICITY

Price elasticity measures the quantity demanded in response to a change in price.

DEMAND IS SAID TO BE ELASTIC  if  there is change in price  in response to which quantity demanded responds substantially .

DEMAND IS SAID TO BE INELASTIC  if there is change in price in response to which quantity demanded responds only slightly .

Price elasticity can be calculated as follows :

Price elasticity of demand= percentage change in quantity /percentage change in price

Example::if there is increase in the price of the tea by 10% which causes the amount of tea we buy to fall by 30% then price elasticity =30%/10% =3(ans).