What do you understand by the elasticity of demand? Discuss the types

Question

What do you understand by the elasticity of demand? Discuss the types of price elasticity and their relation with total expenditure.

27 Apr 2023

Answer :

Word Count : 598

Elasticity of demand is a measure of the responsiveness of the quantity demanded of a product or service to a change in its price. It quantifies the degree to which the demand for a good or service changes in relation to a change in price. The concept of elasticity of demand is important in understanding consumer behavior, pricing strategies, and market dynamics.

Types of Price Elasticity of Demand:

Price Elasticity of Demand (PED): Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. PED can be classified into three categories:

a) Elastic Demand: When the percentage change in quantity demanded is greater than the percentage change in price (PED > 1), demand is said to be elastic. In elastic demand, a small change in price leads to ____ ____ ____ ____ ________ _____ ______ _________.
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