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Unformatted text preview: is the E d,p ? 30 20 10 1 30 + 20 50 5 E d,p = = = = 15(1/5) = -3 35 40 -5 -1 Price elasticity Demanded is always (-) 35 + 40 75 15 Price Elasticity of Demanded is always being negative. This is because the way of demand tells us that price and quantity demanded are negatively related. E d,p is a unit less # Ex. 2 E d,p = -2.5 and price falls by 5%. What happens to Quantity Demanded? % Q d E d,p = % P % Q d-2.5 = = 12.5 % = % Q d-5 the larger the absolute value of E d,p the more responsive quantity demanded is to a change in price Absolute value of % Q d Demand E d,p relative to Response Monday, October 09, 2006 % P Greater than 1 % Q d &gt; % P Elastic Between 0 and 1 % Q d &lt; % P Inelastic Equal to 1 % Q d = % P Unit Elastic...
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