ECO-Cha 06

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

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

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