Price Elasticity And The Price Elasticity Of Demand

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1. What is the price elasticity of demand? How is the price elasticity of demand calculated?

The price elasticity of demand as I understand it is how much demand for an item will change with a given change in the price of an item. To be more precise it is the percent change in demand per unit of time divided by the percent change in price. (Khan, "Price elasticity of demand") While most examples I could find of price elasticity of demand were linear, I do not think they would truly be that way in real life. I think they would look more like the equation of y=1/x. As the price goes up the demand would approach 0 units but possibly never reach 0 and as the price goes down the number of units demanded would approach infinity. I also think that it will be affected by things that are beyond the simple link of price and demand. I think how drastically the price is changed over a short amount of time would also effect the price elasticity. This last example could be demonstrated with a real elastic band. If you were to stretch it slowly, not making any drastic moves, it would stretch much more over time. On the other hand if you just pulled with everything you had all at once it would resist to the point of breaking.

References:
Khan, S. (2012, January 3). Price elasticity of demand. …show more content…

(BuisnessDictionary.com) What the really translates to is if there is some measurable gain from getting another unit of something. For example, the marginal utility of a third windshield wiper in the middle of your windshield would be zero or very close to zero. It would not help you at all. If on the otherhand you started with no windshield wipers and added one, the marginal utility of that one wiper would be very high. You could now drive when it was raining out whereas before you would not have been able

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