Chapter 7 key slides

Chapter 7 key slides - Price Elasticity of Demand Price...

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Price Elasticity of Demand Price elasticity reveals the responsiveness of the amount purchased to a change in price. Price Elasticity of demand = % Q % P = % Change in quantity demanded % Change in Price - or put more simply - 2 ) ( ) ( 2 ) ( ) ( 1 0 1 0 1 0 1 0 P P P P Q Q Q Q + - + - = = ) ( ) ( ) ( ) ( 1 0 1 0 1 0 1 0 P P P P Q Q Q Q + - + -
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Jump to first page Copyright ©2006 Thomson Business and Economics. All rights reserved. Price Elasticity of Demand After calculating the price elasticity of demand, you can determine whether it is elastic, inelastic, or unitary elastic with the following chart: If the absolute value of the elasticity term < 1, then the demand is inelastic . If the absolute value of the elasticity term > 1, then the demand is elastic . If the absolute value of the elasticity term = 1, then the demand is unitary elastic . Because price elasticity of demand is always negative, the sign on the coefficient is often omitted in discussions of elasticity.
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Jump to first page Copyright ©2006 Thomson Business and Economics. All rights reserved.
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This note was uploaded on 04/26/2008 for the course ECON 2030 taught by Professor Thomassen during the Spring '08 term at Auburn University.

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Chapter 7 key slides - Price Elasticity of Demand Price...

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