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The Benjamin Group
Price elasticity (of demand) measures how sensitive demand for a product is to changes in the product’s price. A product with high price elasticity will see a sharp increase (or decrease) in demand for every percentage decrease (or increase) in the price. Products with low price elasticity show little change in demand from price changes (i.e. a medicine with no substitutes).
Price elasticity is calculated by taking the percentage change in quantity demanded and dividing it by the percentage change in price ( Price Elasticity = change in quantity demanded / change in price).
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