Economics (AS)·Price elasticity of demand · NSSCAS 2.2a
Price elasticity of demand
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You already know from NSSCO that when price rises, quantity demanded falls. But by how much? Price elasticity of demand answers exactly that — it measures how responsive quantity demanded is to a change in price. In this lesson we define it precisely, calculate it step by step, draw the full range of elasticities from perfectly inelastic to perfectly elastic, examine the factors that shape it, and — the part the AS examiner rewards most — use it to judge a firm's revenue and real pricing and tax decisions.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Economics (AS) 2.2a):
- Explain the meaning and perform calculation of elasticity of demand
- Describe the range of elasticities of demand
- Discuss the factors affecting elasticity of demand
- Evaluate the implications for revenue and business decisions of price elasticity of demand
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