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Price Elasticity Essay Topics & Paper Examples

Price Elasticity of Demand

Supply and demand plays a vital role in the economy. Price is the central determinant of both the demand and supply, for example the higher the price of a good or a service the less the product is demanded. In circumstance where the price goes down, demand increases. The response of price and quantity demanded create an inverse relationship between the two. Whereas demand portrays the consumer decision making in purchases, supply is drawn on producer’s willingness to make profit (Parkin, 2002). The overriding factor in determining price elasticity of demand is the willingness and ability of consumers to easily switch from one good to another (substitute goods) in case of any price change. If the demand for corn increases…