Elasticity of Demand of Specific Goods
Economics Revision Article Series
The elasticity of demand of a specific good is defined as:
Percentage increase in quantity demanded of the product/Percent decrease in price of the product
Price elastic demand
If a one percent drop in prices leads to more than one percent increase in quantity demanded, we say it is price elastic demand.
If the percentage drop in price and percentage increase in quantity demanded are same, it said to be unit elastic demand.
If percentage drop in price is higher than the percentage change in quantity demanded, we say it is price inelastic demand.
The concepts are useful because measurements can be made and elasticities can be calculated. The results are used for decision making regarding setting supply schedules.
For Further Reference
Explorations in Economic Demand, Part I
Shifts in the Demand Curve
Price Elasticity of Demand