ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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% change in Qd / % change in Price
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% change in Price / % change in Qd
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Change in quantity / Change in price
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% change in price / % change in income
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Detailed explanation-1: -Price elasticity formula: Ed = percentage change in Qd / percentage change in Price. If the percentage change is not given in a problem, it can be computed using the following formula: Percentage change in Qd = (Q1-Q2) / [1/2 (Q1+Q2)] where Q1 = initial Qd, and Q2 = new Qd.
Detailed explanation-2: -The price elasticity of demand (which is often shortened to demand elasticity) is defined to be the percentage change in quantity demanded, q, divided by the percentage change in price, p. The formula for the demand elasticity (ǫ) is: ǫ = p q dq dp .
Detailed explanation-3: -Formula for Elasticity of Demand For example, imagine that a firm sells 1000 units during time period 0 at a price of $100. In time period 1, the firm raises its price by 10% to $110 and achieves sales of 950 units (a loss of 5% in quantity demanded). The price elasticity of demand for the firm is-5%/10% =-0.5.
Detailed explanation-4: -The price elasticity of demand measures the responsiveness of quantity demanded to changes in price; it is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
Detailed explanation-5: -What is price elasticity of demand? Price elasticity of demand is the ratio of the percentage change in quantity demanded of a product to the percentage change in price. Economists employ it to understand how supply and demand change when a product’s price changes.