price elasticity

• what is price elasticity of demand


  the responsiveness of quantity demanded of a good/service to a change in price
• how to calculate Price elasticity of demand


  % change in quantity of demand / % change in price
• why is the price elasticity of demand always negative


  due to the law of demand where the quantity of demand and price have an inverse relationship
• what value is at perfectly inelastic

  0
• what value is at inelastic


  <1
• what value is at unitary


  -1
• what value is at elastic


  >1
• what value is at perfectly elastic


  infinity
• what are the determinants of price elasticity of demand


  proportion of income spent, necessity, definition, brand loyalty, availability of substitutes, time, habit forming goods
• what is price elasticity of supply


  measures the responsiveness of quantity supplied of a good or service to a change in price
• how to calculate price elasticity of supply


  % change in quantity supplied / % change in price
• why is price elasticity of supply always positive


  as there is a positive relationship between quantity supplied and price
• what are the determinants of price elasticity of supply


  Time, availability of stock, spare capacity
• what is income elasticity of demand 


  measures the responsiveness of quantity demanded due to a change in income
• when income is positive what is in demand


  normal goods
• when income is negative, what is in demand


  inferoir goods
• what type of good is inelastic


  necessity
• what type of good is elastic


  luxury
• what is cross elasticity of demand 


  measures the responsiveness of quantity demanded of good a to the change of price in good b
• how to calculate XED


  % change in quantity demanded of good a / % change in price of good b
• what type of good is it if XED is negative


  complimentary good
• what type of good is it if XED is positive


  Substitute goods
• how can price elasticity of demand be useful for producers

  price strategies on firms, price volatility in a market following changes in supply, the effect of a change in indirect tax on price and quantity demanded.