The Law of Demand tells you that when goods and services are more expensive, people want less (all else equal), but there is more to that story. When the price of your weekly treat, a cupcake, doubles you may just stop buying it, or buy something else. However, if the price of a someone’s necessary medication doubles, it’s likely that they won’t just stop buying the medication. Economists go beyond just stating that as prices go up people buy less. Economists use elasticities to measure how sensitive one variable is to another. In this lesson, the two variables that we look at are price and quantity demanded. Here, Dr. Angela Doku explains the price elasticity of demand.
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