Price Elasticity of Demand and Supply

Price Elasticity of Demand and Supply - Price Elasticity of...

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Price Elasticity of Demand and Supply 02/17/2016 ° ° ° Price Elasticity of Demand and Supply Elasticity:Putting numbers to the Differences in what Demand Curves “Look Like” o Elasticity is the measure used by economists to determine the responsiveness of consumers or suppliers to price changes Elasticity is computed : o Percentage change in quantity demanded divied by percentage change in price  o By percentage we typically use absolute vaule (drop the minus sign) o As the numbers gets “bigger” (in absolute value terms), consumers are more sensitive or responsive to the price change o Take E=.5 That is %∆Qd/%∆P=.5 It means, for example, that for ebery 10% increase (or decrease) in price, the quantity demanded decreases (or increases) by 5%
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