Explain what it means for the price elasticity ofdemand for beer to be 1.5.

Explain what it means for the price elasticity of demand for beer to be 1.5.

Expert Solution

WHAT IS PRICE ELASTICITY OF DEMAND?

Price elasticity of demand is an economic measure of the change in the quantity demanded or purchased of a product in relation to its price change. Expressed mathematically, it is:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

When Price elasticity of demand is greater than one(PED>1) demand is ELASTIC. It means consumers being very sensitive to changes in price.

PRICE ELASTICITY OF DEMAND FOR BEER IS 1.5. IT MEANS DEMAND FOR BEER IS ELASTIC AND WITH CHANGE IN PRICES OF BEER, THE QUANTITY DEMANDED WILL ALSO CHANGE.

SUPPOSE PRICE OF BEER INCREASES, THEN QUANTITY DEMANDED WILL DECREASE.

Rahul Sunny answered 2 years ago

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