1
The Elasticity of Demand
Chapter 6-1
The Concept of Elasticity
•
Elasticity
is a measure of the
responsiveness of one variable to another.
•
The greater the elasticity, the greater the
responsiveness.
Laugher Curve
Q.
What’s the difference between an
economist and a befuddled old man with
Alzheimer’s?
A.
The economist is the one with a
calculator.
The Concept of Elasticity
•
Elasticity
is a measure of the
responsiveness of one variable to another.
•
The greater the elasticity, the greater the
responsiveness.
Price Elasticity
• The
price elasticity of demand
is the
percentage change in quantity demanded
divided by the percentage change in price.
price
in
change
Percentage
demanded
quantity
in
change
Percentage
=
E
D
Sign of Price Elasticity
•
According to the law of demand, whenever
the price rises, the quantity demanded
falls.
Thus the price elasticity of
demand is always negative.
•
Because it is always negative, economists
usually state the value without the sign.

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