The price elasticity of demand is used to measure the responsiveness of the demand after a change in price of the particular

product. It is calculated by dividing the percentage change in demand over the percentage change in price. There are three components to this, which are price elastic, unit elastic, and price inelastic. Price elastic shows a sensitive change of demand towards a price change, and price inelastic shows the opposite phenomena; the price change is not so sensitive towards the goods demanded. For price elastic, it is usually luxury goods such as cars and houses. These goods are very elastic, as a small change in the price may cause a huge shift in demand. For example, assuming that a car is worth R !", """ and there is a slight increase in price from the original price to R #$, """. To calculate this% &#$"""'!""""( ) !"""" * ".+!,$ -fter this, we would now loo. at the demand. -ssuming at R !", """ the /uantity demanded were +$ cars, and after the hi.e of price, the /uantity has dropped to $ cars. 0e would calculate this% &$'+$( ) +$ * ' ".1, To calculate the price elasticity of demand% &'".1,( ) ".+!,$ * 2.$, If this value is more than +, hence it is a very sensitive product to price changes. The value we calculated was 2.$,, a very high product of elasticity of demand. This shows that cars are extremely sensitive to a slight change in price. - lower elasticity of demand would usually be in the case of household goods such as groceries. For example, assuming that the price of sugar is R $ for + pac.et and the price goes up to R !. The /uantity demanded for sugar at the old price was 3" pac.ets, and with the new price, it drops to +# pac.ets. To calculate this% &R ! 4 R $( ) R $ * ".1 The /uantity demanded% &+# 4 3"( ) 3" * ' "."$ 0hen calculating the price elasticity of demand%

&' "."$( ) ".1 * "."! This figure shows that it is lesser than +, hence this product has a low price elasticity. 5sually these goods, even if there is a high change in price, people still resort to it, as it is a basic good used to satisfy one6s needs 4 food.