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First section: Information
Price elasticity of demand
Elasticity is a term widely used in economics to denote the “responsiveness of one variable to changes in another.” In proper words, it is the relative response of one variable to changes in another variable. The phrase “relative response” is best interpreted as the percentage change.
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.
More precisely, it gives the percentage change in quantity demanded in response to a one per cent change in price (ceteris paribus, i.e. holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall.
Alfred Marshall (26 July 1842 – 13 July 1924) was one of the most influential economists of his time.
His book, Principles of Economics (1890), was the dominant economic textbook in England for many years. It brings the ideas of supply and demand, marginal utility, and costs of production into a coherent whole. He is known as one of the founders of economics.
And he stated “elasticity of demand” in his book Principles of Economics, published in 1890. He described it thus: "And we may say generally: the elasticity (or responsiveness) of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price". He reasons this since "the only universal law as to a person's desire for a commodity is that it diminishes... but this diminution may be slow or rapid. If it is slow... a small fall in price will cause a comparatively large increase in his purchases. But if it is rapid, a small fall in price will cause only a very small increase in his purchases.
In the former case... the elasticity of his wants, we may say, is great. In the latter case... the elasticity of his demand is small."
Price elasticity of demand
Elasticity is a term widely used in economics to denote the “responsiveness of one variable to changes in another.” In proper words, it is the relative response of one variable to changes in another variable. The phrase “relative response” is best interpreted as the percentage change.
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.
More precisely, it gives the percentage change in quantity demanded in response to a one per cent change in price (ceteris paribus, i.e. holding constant all the other determinants of demand, such as income). It was devised by Alfred Marshall.
Alfred Marshall (26 July 1842 – 13 July 1924) was one of the most influential economists of his time.
His book, Principles of Economics (1890), was the dominant economic textbook in England for many years. It brings the ideas of supply and demand, marginal utility, and costs of production into a coherent whole. He is known as one of the founders of economics.
And he stated “elasticity of demand” in his book Principles of Economics, published in 1890. He described it thus: "And we may say generally: the elasticity (or responsiveness) of demand in a market is great or small according as the amount demanded increases much or little for a given fall in price, and diminishes much or little for a given rise in price". He reasons this since "the only universal law as to a person's desire for a commodity is that it diminishes... but this diminution may be slow or rapid. If it is slow... a small fall in price will cause a comparatively large increase in his purchases. But if it is rapid, a small fall in price will cause only a very small increase in his purchases.
In the former case... the elasticity of his wants, we may say, is great. In the latter case... the elasticity of his demand is small."