Question

Please summarize in a 150 words Elasticity of Demand. Microeconomics chapter 6

Answer 1

The elasticity of demand measures the responsiveness of percentage change in the quantity demand of a goods due to the percentage change in the price.

The formula of calculating the elasticity of demand is given below;

Elasticity of demand (Ed)= % change in the quantity demand / % change in the price.

If Ed is greater than 1, then the elasticity of demand is called elastic demand.

If Ed is less than 1, then the elasticity of demand is called inelastic demand.

If Ed is equal to the 1, then the elasticity of demand is called unit elastic demand.

If Ed is equal to the 0, then the elasticity of demand is called perfectly inelastic demand.

If Ed is equal to the infinity, then the elasticity of demand is called perfectly elastic demand.