Suppose the price elasticity of demand for stocks is 1.5

Suppose the price elasticity of demand for stocks is 1.5. This means that for every 10 percent increase in stock prices, the quantity demanded will decline by 15 percent. Does this price elasticity make sense? Explain. 

Yes this price elasticity totally makes sense due to the following causes.

We know (from the basic of economics theory) that supply and demand depends on the price of the product. Now if the price of something goes down that means now more people can afford it and thus the demand increases.

Here price elasticity is 1.5 means that for every 10 percent increase in stock prices, the quantity demanded will decline by 15 percent. So basically whenever the price is increasing less people can afford to buy the stock and basically less people want to buy the stock (because even if the price of the stock changes the return may not change that much so people feel hesitation to buy at higher price).

And the percentage decrease in demand due to the price increase is more than the price increase which is possible and that’s the reason we are getting elasticity as 1.5.

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