Given
The concept of price elasticity describes how revenue increases as prices change.
Computing the price elasticity of this demand function
Computing the price elasticity of this demand function
substituting back in equation
The above equation shows that the demand elasticity. Negative sign describes how demand reacts to price changes:
As the price rises, the quantity demanded falls, and as the price falls, the quantity demanded rises.
The fact that it is negative indicates that price p and quantity demanded q is moving in opposite directions.
The above equation generalizes to the fact that Ed will always have a value less than 1.
This indicates good to be price elastic that means many substitute of goods are available.
Therefore it is a type of substitute good.
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