Answer to Question #218444 in Microeconomics for Sushant99

Question

Explain the term price elasticity of demand? How is it measured? What factors influence market demand for products? If the price elasticity is -3 and RM 100 is the marginal cost of product X, what should be the optimal sale price?

Answer 1

price elasticity of demand tends to be a measure on the ways price influences quantity demanded. If a price increases, demand for practically every good usually decrease. However, this lowers demand for other products compared to some.

Price elasticity of demand tends to be measured based on how respective quantity relates to the presented price. Similarly, price elasticity of demand is attained through dividing % change of the demanded quantity of a respective product with the percentage change of the other.

Market demand for a product is affected by price, competition, and consumers tastes and preferences.