What is the Elasticity of Demand?
The demand for a commodity moves in the contrary direction of its price. But the influence of the price change is always not constant. Sometimes, the demand for a commodity changes substantially even for small price changes. On the other hand, there are some commodities for which the demand is not impacted much by price changes.
Demands for some commodities are receptive to price changes while demands for others are not so receptive to price changes. Price elasticity of demand is a quantity of the receptiveness of the demand for a commodity to changes in its price. Price elasticity of demand for a commodity is defined as the percentage of change in demand for the commodity divided by the percentage change in its price. Price Elasticity of Demand for a good is derived as :
Elasticity of Demand = percentage change in demand for the good divided by the percentage change in price for the good
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