Chapter_5_Elasticity_-_Econ - Chapter 5 Elasticity \u25cf It is a unit free measure of responsiveness of quantity demanded or supplied to a price \u25cf

Chapter_5_Elasticity_-_Econ - Chapter 5 Elasticity ● It...

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Chapter 5 Elasticity It is a unit free measure of responsiveness of quantity demanded or supplied to a price. Explains how total spending on a good changes with a price change. *Elasticity of Demand equation = % change in quantity over % change in price* Take difference between change in quantity demanded divided by average to get % change in quantity demanded Is more elastic at the top and it becomes less elastic If you have two curves, the steeper curve is less elastic and the flatter curve is more elastic Price elasticity of demand is always negative Bigger number means most responsive If the elasticity of demand is greater than one then it is elastic, if it is less than one then it is inelastic, and if it is one it is unit elastic Revenue Rule Elastic demand less than 1 means inelastic and price and revenue move together Elastic demand greater than 1 means elastic and price and revenue move opposite
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