Q:

What are four determinants of price elasticity of demand?

A:

Quick Answer

Price elasticity of demand has four determinants: product necessity, how many substitutes for the product there are, how large a percentage of income the product costs, and how frequently its purchased, according to Economics Help. By using these determinants, businesses can estimate how a change in the price affects demand.

Continue Reading

Full Answer

Economics Help states that price elastic goods are those that are easily affected by changes in prices, with demand changing along with the rise and fall in he price. Price inelastic goods are those that are difficult to replace or so low costing that a change in the price has little effect on the overall demand of the product or service.

Learn more about Economics

Related Questions

  • Q:

    What is difference between slope and the calculation of elasticity for a linear demand curve?

    A:

    The slope and elasticity of a linear demand curve are extremely closely linked, but where the slope itself is just a measure of how much demand changes given a change in price, elasticity is a description of what that slope means. Elasticity relates slope to the profitability of price changes.

    Full Answer >
    Filed Under:
  • Q:

    What is the importance of price elasticity of demand?

    A:

    The price elasticity of demand is important because it illustrates the effect that a change in price has on the quantity demanded of a particular good. It may be perfectly elastic, perfectly inelastic or somewhere between the two.

    Full Answer >
    Filed Under:
  • Q:

    What is elastic demand?

    A:

    Elastic demand, also known as the price elasticity of demand, describes the price sensitivity of a particular good. When a product has elastic demand, a percentage change in price is followed by a larger, inverse percentage change in the quantity demanded. Inelastic demand is the opposite of elastic demand.

    Full Answer >
    Filed Under:
  • Q:

    What is a demand curve?

    A:

    A demand curve is a graphical representation of the demand of a product based on its price. Demand curves are downward sloping, demonstrating the law of demand that states that the quantity of a product or service demanded moves in the opposite direction of its price.

    Full Answer >
    Filed Under:

Explore