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Price elasticity of demand is always negative due to the inverse relationship between price and quantity demanded.
Goods with high price elasticity tend to have fewer substitutes available.
A price elasticity value greater than 1 indicates that demand is elastic.
Necessities typically have a lower price elasticity than luxury goods.
Price elasticity of demand can only be calculated for goods with a linear demand curve.
Understanding the Answer
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Elasticity is a negative number because price and quantity demanded move in opposite directions. Other options are incorrect because People think high elasticity means fewer substitutes, but actually many substitutes make demand more responsive; Elasticity can be calculated for any demand curve, not just linear ones.
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Price Elasticity of Demand
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Definition
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It quantifies how much the quantity demanded will change in percentage terms in response to a one percent change in price. Elasticity values help determine the sensitivity of demand to price fluctuations.
Topic Definition
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It quantifies how much the quantity demanded will change in percentage terms in response to a one percent change in price. Elasticity values help determine the sensitivity of demand to price fluctuations.
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