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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 6, Problem 2DQ
Textbook Problem
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Explain why the elasticity of demand formula normally eliminates minus signs.

To determine

To find the reason behind the elimination of minus sign from the elasticity formula.

Explanation of Solution

The negative sign in the elasticity formula shows the inverse relationship between price and quantity demand of a commodity.

As the price of a commodity rises by a certain percentage, the quantity demand for that commodity fall.

Thus, a change in one of the variables must be negative and a change in the other variable must be positive. The formula of elasticity will eliminate the existing negative sign due to negative changes in one of the variables.

Also, the negative sign is ignored to avoid ambiguity...

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