Can price elasticity of demand be a negative number? In cfa book on economics I haven’t found a single example of a price elasticity of demand being a negative number, but schweser calculates it as a negative number in some cases. Can anyone clarify this for me? Thanks
it’s always negative. Price goes up quantity goes down. usually it’s displayed in absolute value terms, because it’s understood that it is negative.
Not quite rite for goods that due to price increase may become more desirebale (marleting, status goods)
Not quite rite for goods that due to price increase may become more desirebale (marketing, status goods)
Price elasticity of demand can calculate to a negative or positive number. It’s usually negative for normal goods. The texts usually take the absolute value of the elasticity number to determine whether the relationship is elastic or inelastic (with unit elasticity: e = 0). elastic: e > 1; inelastic: e < 1. When price increases, an elastic good will result in lower total revenue. When price decreases, an elastic good will result in greater total revenue. Cheers.
If on the CFAI books they only consider the absolute values, do you think they can still test us like schweser with options like a) -.34 b) .34 then? thanks
CFAI text states that it is a norm to use absolute values for the price elasticity. So I highly doubt that they will give a negative value. But I know what you mean because Schweser has the unit price elasticity = -1 so they dont use the absolute values…i would just follow the CFAI.
Bump For confirmation, although price elasticity of demand is always negative (with a few exceptions, as mentioned about) CFAI only requires candidates to view them as absolute values. The assumption is that negative values are understood to be there, even though they aren’t directly expressed as such.