Price elasticity of demand measures how much a change in price affects the quantity demanded of a good. It can be expressed as: pi = (ΔQ/ΔP) – 1
In other words, the change in quantity demanded is equal to the change in price multiplied by -1. The higher the value of pi, the more responsive consumers are to changes in price.
There are several reasons why consumers might be more responsive to price changes.
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