Price elasticity of demand
Definition. Price elasticity of demand measures the responsiveness of quantity demanded to a change in the price of a good. It is calculated as the percentage change in quantity demanded divided by the percentage change in price, and is usually negative because demand slopes downward.
Demand is price elastic when the value exceeds one and inelastic when below one. It determines how the burden of an indirect tax is shared between producers and consumers and how tax revenue and prices change.
This term belongs to Indirect Taxes and Subsidies in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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