Economics Chapter 4 Notes 4.1 Price Elasticity of Demand • Elastic: when quantity demanded is quite responsive to changes in price, • Inelastic: when quantity demanded is relatively unresponsive to changes in price. • Price Elasticity of Demand: a measure of the responsiveness of quantity demanded to a change in the commodity’s own price. o N= (percentage change in quantity demanded) / (percentage change in price) **percent changes are based on averages • (New – Original) / (Average) • The more responsive quantity demanded, the large the N value. • Elasticity is 0 when a price change leads to no change in quantity demanded. o Vertical Demand Curve • Elasticity is very large when the demand curve is almost or is horizontal. • Inelastic Demand: when the percentage change in quantity demanded is less than the percentage change in price o Elasticity is LESS than 1 • Elastic Demand: when the percentage change in quantity is greater than the percentage change in price
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