Chapter 6-1 - The Concept of Elasticity The Elasticity of...

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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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