Price Elasticity

Price Elasticity - Principles of Microeconomics Price Elasticity of Demand Elasticity measures how much one variable responds to changes in another

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Principles of Microeconomics Price Elasticity of Demand Elasticity measures how much one variable responds to changes in another variable. With respect to economics: elasticity is the numerical measure of the responsiveness of Q s or Q d to one of its determinants. Price Elasticity of Demand Price Elasticity of Demand (PED)= % change in quantity demanded/% change in price It measures how much quantity demanded responds to a change in price. If PED is more than 1 then the PED for good x is elastic. o This implies that the consumers of good x are marginal consumers. (They will shop around for the best price within its substitute goods). This could also mean that this good is a luxury good. If PED is less than 1 then the PED for good x is inelastic. o This implies that the consumers of good x are brand loyal consumers, or that there are no close substitutes for good x. The good could be a necessity. If PED is equal to 1 then the PED for good x is unitary.
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This note was uploaded on 10/05/2011 for the course ECON 2023 taught by Professor Unknown during the Spring '05 term at Arkansas.

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Price Elasticity - Principles of Microeconomics Price Elasticity of Demand Elasticity measures how much one variable responds to changes in another

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