Understanding price elasticity and how it relates to Global Mobility

Expat Academy Understanding price elasticity and how it relates to Global Mobility

Price elasticity

Price elasticity can be defined as a measurement of the change in demand when the price of a good changes. While this number can range from 0 to infinity, it is most commonly thought of as 0 to -1 and referred to in absolute value (positive values only) terms.

A price elasticity of zero represents no change in demand for any change in price for a given good. We call this a perfectly inelastic good. Toilet paper is an example of a relatively inelastic good where demand stays fairly constant despite price fluctuations. On the other end of the spectrum, we have a perfectly elastic good where an increase in price has a one-to-one relationship with a decrease in demand. Can you think of a good that’s demand has a one-to-one relationship with its price?

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