Provide a simple definition of the price elasticity of demand and expl

Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm’s manager.

What will be an ideal response?

ANSWER

The price elasticity of demand is a measure of the sensitivity of quantity demanded to a change in price. To be specific, it is calculated as the percentage change in quantity demanded divided by the percentage change in price. Knowing the price elasticity of demand is very useful to managers because it allows them to predict whether a specific change in the price of a product will cause total revenues to increase, decrease, or stay the same.