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
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.
Vertical Demand Curve
Elasticity is very large when the demand curve is almost or is horizontal.
when the percentage change in quantity demanded is less than the percentage change in price
Elasticity is LESS than 1
when the percentage change in quantity is greater than the percentage change in price
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