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ﬁv E Q 'Eiv @o @ Cc Wed 1:28 AM q 613 Economic Notes 5 Price Eiasticity or Demanda Measure haw responsive quantity demanded Is to a price change; percentage change ing quantity demanded diVided by the percentage change in price.
price Elasticity of Demand : Percentage change in aaantrty demanded / percentage change in price Price Elasticity Farmula- Percentage change in quantity demanded divided by the percentage change in price; the average quantity and average price are used a bases for computing
percentage change in quantity and in price, ED 2 Zva 1‘ 2va
ED : va/ tatai/’2 VD i’ (p+p"il/2
inelastic Demanda A change in price has relatively little effect on quantity demanded; the percentage ch nge in auantity UnitaElastic Demand The percentage change in quantity demanded equals the percentage equals the percentage change in price, the resulting price elasticity has an absolute value
of ‘l 0 Elastic Demand A change In price has a relatively iarge effect an aaantity demanded; the percentage change in quantity demanaed exceeds the percentage change In price: the
resulting price elasticity has an absolute value exceeding 10, Total Revenue- Price multiplied by the quantity demanded at the price. Linear Demand Carver A straightaline carve; such as a demand curve has a constant slope but usually has a varying range price elasticity.
Constant Elasticity Demand Curt/es Perfectly Elastic Demand Curve A horizontal line reflecting a situation in which any piice increase reduces au ity demanded to zero, the elasticity has n absolute value of infinity. Perfectly inelastic Demand Curve A vertical line reflecting a situation in which on price change has no effect an the quantity demanded, the elasticity value equals zero UnitrElastic Demand Curt/er Everywhere along the demand curve, the percentage change in price causes an eaaai but offsetting percentage change in aaantity demanded, sa tatai
revenue remains the sum he elasticity has an absolute value of 1 o. Constant-Elasticity Demand Curve- The type of demand that exists when price elasticity is the same everywhere along the curve; the elastiCIty value is constant, [Demand becomes more elastic overtime]
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