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.
RD
Related Economics A Level answers
All answers ▸How should I approach a data-response question?
Analyse the effects on the UK economy of a recession in another economy with trade ties.
What is the Phillips Curve?
A product with perfectly elastic supply has sales of 100 units per week at a price of £2 per unit. Price elasticity of demand is(-)1 .5 over the relevant range. The government imposes a tax 20%. What will be the government’s weekly tax revenue?