Price elasticity of demand:-
Price Elasticity of Demand , means the degree of responsiveness of demand for a commodity , with reference to change in the price of such commodity.
Features of Price Elasticity of Demand:-
- Establishes a quantitative relationship, between quantity demanded of a commodity and its price
Price Elasticity of Demand establishes a quantitative relationship, between quantity demanded of a commodity and its price, while other factors remain constant. This means, what will be the quantitative change in the demand of a given commodity, if the price of the commodity changes . It is assumed that all other factors which can impact demand remain constant.
- Meaning of Higher value ofPrice Elasticity
A Higher numerical value of Price Elasticity of Demand implies that, change in price of the commodity significantly impacts the quantity demanded for such commodity.
- Price Elasticity of Demand varies with the nature of the Commodity
Change in price different goods may lead to a different change in the demand of such goods. In some cases , there maybe a small change in demand due to change in price, Where is another cases there maybe a large change in demand due to change in price. For example, if prices of Petrol and Apple rise by 2% and their demands falls by 20% and 5% respectively, then commodity ‘Petrol’ is said to be more elastic as compared to commodity ‘Apple’.
- Other names of Price Elasticity of Demand
Given that price is the most important factor which determines demand, price elasticity of demand is also referred to as “Elasticity of demand” or “demand Elasticity” or “Elasticity”.