# 9-19 Reading Notes- Elasticity - than 1-Elasticity is less...

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Chapter 4- Concept of Elasticity Concept of Elasticity- - A measure of the extent to which quantity demanded and quantity supplied respond to variations in price, income, and other factors. Price elasticity of demand- - Is a measure of the responsiveness of the quantity demanded of that food to changes in its price…. Or - The Percentage changed in quantity demanded that results from a 1 percent change in its price. For example: If a 2 percent reduction in the price of pork led to a 6 percent increase in the quantity of pork demanded, the price of elasticity of demand for pork would be Percentage change in quantity demanded/ Percentage change in price = 6 percent / -2 percent = -.3. Elasticity is defined to be a positive number. Elastic- - Demand is elastic with respect to price is price elasticity is greater than 1. - Elasticity greater than 1 - Quantity is more responsive to price Inelastic - Demand is inelastic with respect to price if price elasticity of demand is less

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Unformatted text preview: than 1. -Elasticity is less than one.-Quantity is less responsive to price. Unit elastic-Demand is unit elastic with respect to price if price elasticity of demand equals 1. Price Elasticity of Demand Price elasticity is not ht slope of the demand schedule. A straight line demand schedule has a constant slope but varying elasticity along the schedule. Revenue and Price elasticity Revenue = Price x Quantity Raising price by one percent has two opposing effects on revenue. It raises the price paid by “loyal customers,” thus raising revenue. It lowers the quantity sold thus lowering revenue. Elasticity tells us which of the opposing effects wins the tug of war… When elasticity if greater than one… The quantity effect on revenue is larger. When elasticity is less than one… The Price effect on revenue is larger....
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9-19 Reading Notes- Elasticity - than 1-Elasticity is less...

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