What does it mean to say that demand for a product is price elastic?

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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.


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