Price elasticity of demand shows how the product demanded responds to changes in price. It gives the percentage by which a product demanded will change if price changes by one percent. Due to the law of demand, it is clear that the price elasticity of demand should contain a negative sign because quantity demanded will always reduce in case price increases. Since the Price Elasticity of Demand (PED) is less than 1, we conclude that the demand for paint is elastic. This means that a change in price will lead to a more than proportionate change in quantity demanded. In lieu of this, if prices change, people will massively reduce their demand for paint.
The laws of demand and supply are the key concepts in Economics and all decisions are based on them. Demand is the quantity of a product that a buyer is willing and can afford to buy at the prevailing market rate. There is an inverse relationship between demand and price and means that people will always reduce their demand for a product in case the prices go up. The law of demand stipulates that the higher the price of a good the lower the quantity demanded ceteris paribus and vice-versa. Ceteris paribus means that all other factors such as price of substitutes, prices of complementary goods, tastes and preferences among others that influence demand will be kept constant.
On the other hand, supply relates to the quantity that producers are willing to avail at the market at the prevailing market rate (Bensako & Braetigum, 2007). There is a positive relationship between quantity supplied and price since the motive of sellers is to make profit. The more they sell the more money they will earn. The law of supply thus stipulates that the higher the price, the higher the quantity supplied ceteris paribus and vice-versa. Ceteris paribus means that all factors influencing supply such as weather, transport, and competition among others will be held constant.