Explain price elasticity of demand
Price elasticity of demand shows the responsiveness of the demand of a product to a change in price. This indicates the level of necessity or luxury of that good. For example, a litre of milk would be relatively price inelastic, meaning that if the price increases for a litre of milk, demand would decrease, but by a smaller proportion. A fillet steak, however, would be relatively price elastic as it is a luxury good, which means as the price changes, demand for that product (a fillet steak) would change to a greater extent than the initial price change.
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