070907 - | A shallow(close to horizontal demand curve indicates a highly responsive economy(price rises slightly quantity demanded drops

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Sheet1 Page 1 07/09/07 | ---------* A shallow (close to horizontal) demand curve indicates a highly responsive economy (price rises slightly, quantity demanded d A steep demand curve indicates a 'not very responsive' economy, the price can increase greatly, but the quantity demanded w Elasticity: How strongly do people respond to a change? Remember absolute value To calculate percentage change, use midpoint formula: for example, if calculating percent change in q demanded: (q1 - q2)/qmidpoint E > 1 => Elastic (Responsive) E = 1 => Unit Elastic E < 1 => Inelastic (Not responsive) E = 0 => Perfectly inelastic (vertical demand) E = " => Perfectly elastic (horizontal demand) In general, with a downward-sloping straight-line demand curve, as the quantity demanded increases, elasticity changes (from E = |(percentage change in q demanded)|/|(percentage change in price)| = |(hQ/Q)/(hP/P)| = |(hQ/hP) * (P/Q)| = |(1/slope) * (P Q
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Sheet1 Page 2 A vertical demand curve has NO responsiveness - "perfectly inelastic"
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This note was uploaded on 04/13/2008 for the course ECO 2023 taught by Professor Rush during the Summer '08 term at University of Florida.

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070907 - | A shallow(close to horizontal demand curve indicates a highly responsive economy(price rises slightly quantity demanded drops

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