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Measures consumers' sensitivity to price changes. Price elasticity of demand Income elasticity of demand Competitive profit elasticity of demand Inelastic demand price parity 1 points

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Price elasticity of demand helps to measure consumers' sensitivity to price changes.

The price elasticity of demand for a good or service is the percentage change in quantity demanded of a particular good or service divided by the percentage change in the price of that good or service, while all other factors are constant.

It helps in making advanced decisions on the pricing strategy to be followed. The demand curve will have a downward slope.

Makers of goods need to determine manufacturing plans, as well as for governments to assess how to impose taxes on goods and services. Many factors can thus affect the elasticity of demand for goods like a necessity, duration, income, availability of substitutes, etc.

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