How Do You Calculate Own Price Elasticity?
Price elasticity of demand measures the rate of response of the quantity demanded, due to a price change. It shows the percentage change in the quantity demanded caused by a percentage change in price. This function is an inverse relationship between price and quantity, so price elasticity will always be a negative number. Own price elasticity of demand is a specific type of elasticity that refers to changes in quantities due to changes in the price of that same good, hence the term “own.” It is a very useful piece of data for businesses to determine how sensitive the demand of a product is to price fluctuations. Gather the data for the quantities and prices of the time period to be studied. The required data includes the old and new quantities and their respective prices. Consider a scenario involving the sale of salt with an old quantity and price of 1000 pounds salt at $0.75 per pound and a new quantity and price of 1500 pounds salt at $0.60 per pound. Calculate the % change in quan
