verðbólguþættir

Verðbólguþættir, also known as price elasticity of demand, is a fundamental concept in economics that measures the responsiveness of the quantity demanded of a good or service to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. The formula for price elasticity of demand is:

E_d = (% change in quantity demanded) / (% change in price)

Price elasticity of demand can be categorized into three main types:

1. Elastic demand: When the price elasticity of demand is greater than 1, the demand is considered elastic. This means that a small change in price will result in a relatively large change in quantity demanded. For example, luxury goods often have elastic demand.

2. Inelastic demand: When the price elasticity of demand is less than 1, the demand is considered inelastic. This means that a change in price will result in a relatively small change in quantity demanded. For example, necessities like water often have inelastic demand.

3. Unit elastic demand: When the price elasticity of demand is equal to 1, the demand is considered unit elastic. This means that the percentage change in quantity demanded is equal to the percentage change in price. For example, some basic goods like coffee may have unit elastic demand.

Price elasticity of demand is influenced by several factors, including the availability of substitutes, the necessity of the good, and the time period considered. Understanding price elasticity of demand is crucial for businesses to set prices, for governments to design policies, and for consumers to make informed decisions.