Explain price elasticity of demand.

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Solution

Price elasticity of demand is the measure of the degree of responsiveness of the demand for a good to the changes in its price. It is defined as the percentage change in the demand for a good divided by the percentage change in its price.

Where,

ΔQ = Q₂ − Q₁, change in demand

ΔP = P₂ − P₁, change in demand

P = Initial price

Q = Initial quantity

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