Explain what is meant by the term 'price elasticity of demand', and show with examples how differences in the price elasticity of demand faced by firms will influence their behaviour.

Question

Quizplus · Accepted Answer

The Answer is Define and explain the nature of the price elasticity of demand.
Explain the degrees of price elasticity and the determinants of these.
Show how the behaviour of firms will depend on the nature of the degree of elasticity. In general, if markets are competitive then there will be incentives for firms to cut prices, but the reverse is true if markets are not competitive.

Explain What Is Meant by the Term 'Price Elasticity of Demand