You just opened a flower shop and are trying to understand pricing issues. You were told that elasticities are very vital in determining prices and what products to provide, so you decide to investigate this concept.
You call your friend, an economics professor, and ask, "What is the price elasticity of demand? What determines it? What is elastic and inelastic demand?"
To really appreciate it, compute the following price elasticity's of demand:
- The price of a laptop enhances by 20% and there is a 40% drop in the quantity demanded.
- The price of a pack of cigarettes enhances by 10% and there is a 5% drop in the quantity demanded.
- The price of water enhances by 15% but there is no drop in the quantity demanded