What is price elasticity? How does Moore's Law relate to this concept? What's special about falling chip
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What is price elasticity? How does Moore's Law relate to this concept? What's special about falling chip prices compared to price drops for products like clothing or food?
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Price elasticity is a concept used in economics to measure the responsiveness of the quantity demanded of a product to changes in its price It helps to understand how sensitive consumers are to changes in price The price elasticity of demand PED is calculated using the following formula Price Elasticity of Demand PED Change in Quantity Demanded Change in Price The result of this calculation can be classified into several categories Elastic Demand If the PED is greater than 1 in absolute value it indicates that the quantity demanded is highly responsive to changes in price In other words a small change in price leads to a relatively larger change in the quantity demanded Products with elastic demand are typically more sensitive to price changes and consumers are likely to reduce their consumption significantly if prices increase Inelastic Demand If the PED is less than 1 in absolute value it means that the quantity demanded is not very responsive to price changes In this case changes in price have a relatively small impact on the quantity demanded Products with inelastic demand are considered essential or have limited substitutes and consumers are less likely to change ...View the full answer
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