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251Ch4lecture2

251Ch4lecture2 - Percentage changes%Q%P d d = Chapter 4...

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9/5/2011 1 1 Chapter 4: Elasticity Lecture 2: Calculation of price elasticity of demand Percentage changes – ε d = – Base = = average Qd – Base = = average P ε d = = = 12 2 QQ 2 PP %Q % d P d d Q avgQ P avgP d d Q avgP P avgQ % d P Inelastic Demand Qd = - P + 6 (or P= -2 Qd + 12) Q d 5 4 P $2 → $4 ε d = = = < 1 → inelastic P Q 12
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