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In: Economics

If the price elasticity of a good is .6, what does this tell you?

If the price elasticity of a good is .6, what does this tell you?


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Expert Solution

Since the elasticity of demand can be defined as the measurement of the degree of the responsiveness of the quantity demand due to the change in the price level.

Price elasticity of demand= % change in the quantity demand/ % change in the price

If Ed<1, inelastic demand

If Ed=1 unit elastic demand

If Ed >1, then elastic demand

Since the given price elasticity of demand is 0.6, that is less than 1, so it shows inelastic demand.

It means effect of percentage change in price is less on the percentage change in quantity demanded.

Rahul Sunny answered 1 year ago
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