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Question
Why is minus sign attached to the measure of price elasticity of demand of a normal good in comoparison to the plus sign attached to the measure of price of elasticity of supply? Explain.
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Solution
The measure of price elasticity of demand of a normal good carries minus sign as there exists an inverse relationship between demand and price of the good. That is, other things remaining constant, as the price of a good rises (or falls), the quantity demanded of the good falls (or rises). On the other hand, price elasticity of supply carries plus sign as there exists a positive relationship between the supply of a commodity and its price. To put in other words, when the price of a good rises (or falls), then the quantity supplied will increase (or decrease), other things remaining unchanged.
The measure of price elasticity of demand of a normal good carries minus sign as there exists an inverse relationship between demand and price of the good. That is, other things remaining constant, as the price of a good rises (or falls), the quantity demanded of the good falls (or rises). On the other hand, price elasticity of supply carries plus sign as there exists a positive relationship between the supply of a commodity and its price. To put in other words, when the price of a good rises (or falls), then the quantity supplied will increase (or decrease), other things remaining unchanged.
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