{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ECO-Cha 06 - 6.1 Price elasticity of demand The measure of...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
6.1 Price elasticity of demand: The measure of the responsiveness of quantity demanded to a change in price. Elastic (E D > 1): Quantity demanded is responsive to even a small change in price; Perfectly elastic (E D =: The demand curve is horizontal ; Inelastic (E D <1): A huge change in price results in only a small change in quantity demanded; Perfectly inelastic (E D =0): The demand curve is vertical ; Unit elastic demand (E D =1): Demand with a price elasticity of 1; the percentage change in quantity demanded is equal to the percentage change in price; The flatter the demands curve passing through a given point, the more elastic the demand; The price elasticity of demand depends on three factors: 1. The availability of close substitutes; Goods without close substitutes tend to have inelastic demands; 2. The proportion of income spent on the good; The smaller the proportion of income spent on a good, the lower its elasticity of demand; 3. The amount of time that has elapsed since the price change; The short-run
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern