What does it mean to say that demand for a product is price elastic?
Price elasticity of demand refers to how much the sales of a product change when the price of that product changes. If the price of the product goes up and there is a great decrease in the sales of the product, we say that the demand for the product is elastic. If the price increases and there is not a great decrease in the sales of the product, we say that the demand for the product is relatively inelastic.
Here is an actual formula for finding elasticity more formally:
PEoD = (% Change in Quantity Demanded)/(% Change in Price)
If the price elasticity of demand is greater than 1 and less than infinity, we say that demand for that good is relatively elastic.
Price elasticity of demand is a measure of the extent to which demand for a product changes in response to the price of the product. It is calculated as the ration the ratio of percentage change in demand of the product in response to percentage change in price of the product. This measure of price elasticity of demand is also called the elasticity coefficient. Demand for a product is said to be price elastic when the elasticity coefficient is more than 1. For a product with price elastic demand, the percentage increase in price is more than the resulting percentage increase in price. For products like this any increase in price leads to reduction in the total revenue, while decrease in price leads to increase in total revenue.
Elasticity of demand is the measure of the responsiveness of demand to changes taking place in any of the factors that effect demand.
Price Elasticity of demand refers to the rate of change in quantity demanded as response to change in price of the product. Ceteris Paribus(Other things remaining the same).
When it is said that demand for a product is price elastic it means that the quantity demanded of a product changed due to a change in price of that product.
The elasticity of demand can be calculated as:
EPx = Percentage change in quantity demanded of x/ percentage change in price of x