Chapter 5--Elasticity

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

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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
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