Elasticity of Demand

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What is Elasticity of Demand? Meaning.

Elasticity of Demand indicates the responsiveness of demand to a change in a determinate. For instance, price, price of other goods and income. It measures the responsiveness of the quantity demanded of a good to its price.

You can calculate the (price) elasticity of demand by the percentage change in quantity demanded that occurs in response to a percentage change in price. For example: if in response to a 15% fall in the price of a good, the quantity demanded increases by 30%, the price elasticity of demand would be 30%/(− 15%) = −2.

See the Price Setting (Pricing) Knowledge Center for more on how elasticity of demand is used by marketers in product pricing.

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