Chapter 4

Chapter 4 - Chapter4:Elasticity:51PM 23:13 4.1:...

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Chapter 4: Elasticity 27/09/09 1:51 PM 23:13 4.1: PRICE ELASTICITY OF DEMAND Price elasticity of demand  is a measure of the extent to which the Qd of a product  responds to a change in its price. Represented by ‘n’, it is defined:          n= Percentage change in Quantity demanded                        Percentage change in Price - The % changes are usually calculated as the change ÷ by the  average  value.  Elasticity  is a positive number, and can vary from 0-infinity - When  E  <  1 demand  is  inelastic . – the %  in Qd is >  change in price. The main  determinant  of PED is the  availability of substitutes  for the product. Any  one of a group of close substitute will have a more elastic demand than will the group as  a whole. - Items that have few subs. In the short run tend to develop many subs. When the

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Chapter 4 - Chapter4:Elasticity:51PM 23:13 4.1:...

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