What is price elasticity of demand?

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The quantity of a product or service that is demanded by consumers is related to its product. In most cases, the quantity demanded decreases as the price increases and increases with a decrease in price. The extent to which there is a change in the demand for an increase in the price is known as price elasticity of demand.

For some products the change in demand is very small even for large variations in price. The price elasticity here is very small. Examples of these could be necessities like water, medicines, etc.

For products that people can do without, the price elasticity of demand is very large. For example if the cost of a trip to Hawaii becomes many times the current price a consumer may decide to not go on a trip every year.

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