Question

Price elasticity of demand of goods X is -2 and goods Y is -3. Which of the two goods is more price elastic and why?

Answer 1

According to the inverse relationship between price and quantity demanded, the elasticity of demand is negative. Here, the elasticity of demand for Good Y is −3 and Good X is −2. However, we will not consider the negative sign. Arithmetically, −2 is more than −3, but the elasticity of demand states that −3 is more elastic than −2. Therefore, the demand for Good Y is more elastic than Good X.