Calculating Elasticity and Percentage Changes

Read this article on how to estimate elasticity. Make sure to answer the "Try It" questions.

Try It

Answer to Try It

    • law of demand.
      Correct. The negative sign reflects the law of demand so at a higher price, the quantity demanded for a good or service declines. All price elasticities of demand have a negative sign, so it's easiest to think about elasticity in absolute value, ignoring the negative sign.
    • law of inversion.
      Incorrect. The negative sign reflects the law of demand so at a higher price, the quantity demanded for a good or service declines. All price elasticities of demand have a negative sign, so it's easiest to think about elasticity in absolute value, ignoring the negative sign.
    • law of supply.
      Incorrect. The opposite is true. The negative sign reflects the law of demand so at a higher price, the quantity demanded for a good or service declines. All price elasticities of demand have a negative sign, so it's easiest to think about elasticity in absolute value, ignoring the negative sign.