Question

explain what the price elasticity of demand is for accounting services? If you are selling accounting services, is the demand for those services price elastic or price inelastic?

Answer 1

Price elasticity of demand for accounting services measures the percentage change in quantity of accounting services demanded for an 1% change in its price. This measures the price-responsiveness of accounting services.

When I sell accounting service, the demand for my accounting service will be price elastic because there are many substitute sellers of similar accounting services, therefore if I increase (decrease) my price, quantity demanded of my service will fall (rise). However, the demand for overall accounting service as a single good is inelastic. All firms need accounting to be done, therefore their quantity demanded for accounting services is much less responsive to its price.