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Econ- PED - Subject Microeconomics Topic Price Elasticity...

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Subject: Microeconomics Topic: Price Elasticity of Demand Terms Elasticity- A measure of the responsiveness of quantity demanded or quantity supply to one of its determinants. Price Elasticity of Demand- a measure of how much the quantity demanded of a good responds to a change in price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price. The Price Elasticity of Demand and its determinants o The law of demand states that a fall in the price of a good raises the quantity demanded. o The price elasticity of demand measures how much the quantity demanded changes to a change in price. o A good that is said to have elastic demand if the quantity demanded changes substantially in response to a change in price. o Demand is inelastic if the quantity demanded responds only slightly to a change in price. o The determinants of P.E.D are as follows: Availability of Close Substitutes
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