PE II: Macchine di Sassuolo Brexit coffe

Question 1

How do you calculate price elasticity?

Answer 1

PE = % Change (decrease) in Qunatitiy demanded / % Change in Price per Unit

Question 2

What does it mean if the PE is greater than 1?

Answer 2

the consumer response is called elastic; consumer reaction is bigger than the price change signal

–> if PE is 1,1 means that for every 1 percent increase in the price per unit charged to the costumers, there would be a 1,1 per cent decrease in the total quantity demanded collectively

Question 3

What if the PE is smaller than 1?

Answer 3

the consumer response is called “inelastic”; reaction is smaller than the price change signal
–> PE 0,8: for every 1 per cent increase in PricepU there would be only a 0,8 percent decrease in quantity demanded