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How do you interpret the coefficient of the price elasticity of demand? Explain when Edis 1.5,...

How do you interpret the coefficient of the price elasticity of demand? Explain when Edis 1.5, 0.7, and 1.0.

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Answer #1

When the elasticity of the demand is below 1 that means the demand is price inelastic i.e. a change in the price will have a lower change in the demand for the good like a gasoline demand 0.7 qualifies for that,

When the elasticity of demand is 1 then it will be considered as unit elastic i.e. the change in the price and the demand for the good will be same.

If the EDIS is more than 1 that means a change in the price will have a higher change in the demand for the goods, the luxury goods in the market have such demand that are very elastic.

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