Lecture 5 - Outline for Lecture 5 Price Elasticity of...

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Outline for Lecture 5 Price Elasticity of Demand How do we define price elasticity of demand? -Price elasticity can be defined as a consumer’s sensitivity to a price change. The Price Elasticity Coefficient and Formula How do we measure price elasticity of demand? What is in the numerator of elasticity equation? What is in the denominator? -percentage change in the equation calculated by dividing the change in quantity demanded by the original quantity demanded and dividing the change in price by the original price. -percentage change in quantity demanded of product X; change in quantity demanded of X; change in price of X -percentage change in price of product X; original quantity demanded of X; original price of X In elasticity calculations, we use the midpoint formula to determine percentage changes. According to midpoint formula, how do we measure percentage change in quantity demanded? How do we measure percentage change in price? -change in quantity divided by the sum of quantities divided by two. -change in quantity number and divide it by the change in price divided by the sum of prices divided by two Interpretations of E d
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If price elasticity of demand for a commodity is ___ greater than __ 1, demand is elastic. What does elastic demand indicate in terms of how responsive consumers are to price changes?
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