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Price Elasticity of Demand

You must post a memo which you explain the factors that contribute to the elasticity of goods. You must also incorporate a real-life example of price elasticity of demand, and discuss how it impacts the economy.

* Discuss in detail the influences of price elasticity of demand.
* Explain the factors that contribute to the elasticity of goods.
* Discuss how these factors influence consumers to purchase goods or services.
* Explain how price elasticity of demand relates to microeconomics.
* Give a real-life example of a good that shows elasticity of demand.
* Incorporate the real-life example into the memo.
* Explain if the good is elastic, inelastic, or unitarily elastic. Why?

Solution Preview

You must post a memo which you explain the factors that contribute to the elasticity of goods. You must also incorporate a real-life example of price elasticity of demand, and discuss how it impacts the economy.

* Discuss in detail the influences of price elasticity of demand.
As per economics.about.com, The Price Elasticity of Demand measures the rate of response of quantity demanded due to a price change.
The formula for the Price Elasticity of Demand (PEoD) is:

PEoD = (% Change in Quantity Demanded)/ (% Change in Price)

Hence we must understand the following rules:

* If PEoD > 1 then Demand is Price Elastic (Demand is sensitive to price changes)

* If PEoD = 1 then Demand is Unit Elastic

* If PEoD < 1 then Demand is Price Inelastic (Demand is not sensitive to price changes)

* Explain the factors that contribute to the elasticity of ...

Solution Summary

Response explains price elasticity of demand

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