What is elasticity of demand?
Understand the Problem
The question is asking for an explanation of the concept of elasticity of demand, which refers to how the quantity demanded of a good or service changes in response to a change in its price. This involves understanding the factors that influence demand and how to measure it.
Answer
Elasticity of demand measures how quantity demanded responds to changes in economic factors, like price.
The elasticity of demand measures how the quantity demanded of a good or service changes in response to a change in another economic factor, such as price or income. It indicates how sensitive consumers are to price changes.
Answer for screen readers
The elasticity of demand measures how the quantity demanded of a good or service changes in response to a change in another economic factor, such as price or income. It indicates how sensitive consumers are to price changes.
More Information
Understanding elasticity of demand helps businesses set prices optimally and predict how changes in economic conditions affect sales.
Tips
Confusing elasticity of demand with inelasticity can lead to incorrect assumptions about consumer behavior in response to price changes.
Sources
- What Is Elasticity of Demand? - NetSuite - netsuite.com
- Elasticity of Demand - Econlib - econlib.org
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