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Suppose the price elasticity of demand for TV is estimated to be 4
Suppose the price elasticity of demand for TV is estimated to be 4. What does this mean in term of responsiveness of demand?
Expert Solution
Any value of price elasticity of demand greater than 1 means that the demand for the product is elastic. This means that the elasticity of demand for TVs is highly elastic. In terms of the responsiveness of the demand for TVs, it means that every time there is a percentage change in the price of TVs, the percentage change in quantity demanded will be higher. Specifically, the percentage change in quantity demanded will be 4 times the percentage change in price.
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