https://padlet.com/BISHumanities/ws0w3vl0lpalq6co Honing your skills of DDEE en-us 2021-05-04 13:17:23 UTC 2025-10-06 01:59:33 UTC hello@padlet.com BISHumanities https://padlet.com/BISHumanities/ws0w3vl0lpalq6co/wish/1489474309 2021-05-04 13:17:23 UTC https://padlet.com/BISHumanities/ws0w3vl0lpalq6co/wish/1489474309 https://padlet.com/BISHumanities/ws0w3vl0lpalq6co/wish/1490009445 Price elasticity of demand refers to the responsiveness in demand of consumers with a change in price; when a good is said to be elastic, the % change in quantity demanded is higher than the % change in price. In other words if the price of a good rises then the quantity demanded falls by a lot and the graph is more horizontal (in the case of perfect elasticity, it is perfectly horizontal). On the other hand, if the price elasticity is inelastic, a large change in price causes a small change in quantity demanded, in some cases no change in demand (perfectly inelastic, vertical curve). Price elasticity determines the type of good we are dealing with, for instance highly elastic ones tend to be merit, normal goods for example toothpaste whilst inelastic, can be inferior demerit goods for example cigarettes. Factors which may affect the elasticity of demand include: 1. Time frame – if consumers have time, they can decide to switch to an alternative good (example of substitution effect) as price increases however, in the short term they may decide to stick to the good at higher price, as they do not have the time to seek substitutes. 2. Nature of the good – if consumers are for example addicted to a good (demerit), they may choose to continue purchasing it even at higher prices. If a good isn’t addictive, consumers tend to be more sensitive to price changes. Moreover, if a good is to be considered a necessity, regardless the price change, consumers will continue to purchase this good, it is inelastic. If however a good is solely a normal good or a luxury good, an increase in price may lead to a large fall in demand as consumers choose to limit the consumption of this good for the time being. Income is also a factor, as the higher proportion of income spent on the good, the more responsive the consumers will be to price changes, in other words the bigger the income effect the more price elastic the demand will be. Closeness of substitutes, linking to time frame, also affects price elasticity of demand. The more substitutes to a good there are and the more close they are, the more responsive consumers tend to be as they can easily decide to switch to these alternatives as price increases.]]> 2021-05-04 14:59:30 UTC https://padlet.com/BISHumanities/ws0w3vl0lpalq6co/wish/1490009445