Price Elasticity

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Price Elasticity is an economic concept that illustrates the percentage change in a product’s demand resulting from one percentage change in its price. It is a measure of how sensitive the quantity demanded of it is to its price. When the price rises, quantity demanded falls for almost any good, but the degree differs per type of good and type of market segment. The formula for the coefficient of price elasticity for a good is the following (where P is the price of the demanded good and Q is the quantity of the demanded good):

Price Elasticity = % Change in Q / % Change in P

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