00:01
As a result of a 5 % fall in the price of food, its demand rises by 12 % when the price elasticity of demand and say demand is elastic or inelastic and why.
00:12
So elasticity is an economic measure of how sensitive something is to a change in price.
00:55
Something is said to be inelastic when a change in price does not affect its demand.
01:01
So a common example of this is something like gasoline, where, even when the price goes up, our demand does not change at the same rate as that price change.
01:12
And things that are elastic are things that when the price does change, the demand changes by the same amount, like percentage as the price, or maybe even more, depending on what type of product it is.
01:25
So if we're talking about a result of 5 % fall on the price of food, but its demand rises by 12%.
01:35
So price elasticity of demand is calculated.
01:46
By looking at the percentage change in quantity divided by the percentage change in price...