•Elasticity
is a measure of the responsiveness of one variable to another.•The greater the elasticity, the greater the responsiveness.
Price Elasticity
The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price.
Sign of Price Elasticity
•According to the law of demand, whenever the price rises, the quantity demanded falls. Thus the price elasticity of demand is always negative.
•Because it is always negative, economists usually state the value without the sign.
What Information Price Elasticity Provides
•Price elasticity of demand and supply gives the exact quantity response to a change in price.
