Part one of term paper
Price elasticity of demand is defined as how demand changes as a result of a change in price. It can be said that if a reduction in price leads to an increase in demand then demand is relatively elastic. Elasticity is usually negative. There is an alternative scenario where demand will increase as price does so too. This happens only in the c ...

Part two of term paper
... good. The reason for this being that people will be able to switch to the substitutes when the price of the original good goes up. The greater the number of substitutes and the closer they are, the more people will be able to switch, and so the bigger the substitution effect will be of any price rise. Another determinant is the proportion of income spent on the good. The higher the proportion of our income that is spent on a good, the more we will forced to cut back consumption in the event of a p ...