Chapter 5--Elasticity

# Chapter 5--Elasticity - Chapter 5-Elasticity I Price...

This preview shows page 1. Sign up to view the full content.

Chapter 5—Elasticity I. Price Elasticity of Demand A. Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in price. -E D = (percentage change in quantity demanded) / (Percentage change in price) -E D = (% Δ Q D ) / (% Δ P) B. If the percentage change in quantity demanded is greater than the percentage change in price, demand is elastic. C. If the percentage change in quantity demanded is less than the percentage change in price, demand is inelastic. D. If the percentage change in quantity demanded is equal to the percentage change in price, demand is unit elastic. E. If a small change in price causes an infinitely large change in quantity demanded, demand is perfectly elastic. F. If a change in price causes no change in quantity demanded, demand is perfectly inelastic. G. The coefficient price elasticity of demand (E D ) is negative, signifying the inverse relationship between price and quantity demanded. For convenience, however, the absolute value of the
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/16/2008 for the course ECO 1311 taught by Professor Wheaton during the Fall '07 term at SMU.

Ask a homework question - tutors are online