How does price elasticity affect demand and supply?

Price elasticity is a concept that relates to how changes in the price of a good or service affect the corresponding changes in its demand and supply. When a good or service has high price elasticity, it means that the demand or supply is highly responsive to changes in price. In this case, even small price increases can result in a large decrease in demand, or a small decrease in price can lead to a substantial increase in demand. On the other hand, goods or services with low price elasticity have a less significant relationship between price and demand or supply. Understanding price elasticity is crucial for businesses and policymakers as it helps them determine the optimal pricing strategies and predict the impact of price changes on the market.

This mind map was published on 22 September 2023 and has been viewed 110 times.