Question

Explain the price elasticity with examples. Also explain, how it will defer for elastic & inelastic goods with examples.

Answer 1

Price Elasticity refers to the degree to the degree of responsiveness of quantity demanded of a good to change in its prie

Price Elasticity = - (%change in quantity demanded) /(% cgange in price)

For Example

Price	Quantity
100	20,000
75	10,000

percentage Change in Price = ($75-$100)/($100)= - 25%

percentage Change in Demand = (20,000-10,000)/(10,000) = 100%

the Price Elasticity of Demand = (100)/(-25) = -4.

i.e price elasticity is -4

Elastic Goods refer to a product that is considered to be elastic if the quantity demand of the product changes more when its price rises or falls.

For Example:- Daily Express
We say good is price elastic when a rise in prices causes a larger percentage fall in demand. e.g. if price rises 10% and demand falls 40%, the PED = -4

Inelastic Goods refer to a product that is considered to be inelastic if the quantity demand of the product changes very small when its price rises or falls.

for example:- petrol, salt etc.

We say good is price inelastic, when a rise in price causes a smaller percentage fall in demand, e.g. if price of petrol rises 50%, but demand for petrol only falls 20% the PED = – 0.40

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