Unformatted text preview: e change in price as a percentage of the average price—the average of the initial and new price, and we express the change in the quantity demanded as a percentage of the average quantity demanded—
the average of the initial and new quantity. The percentage change in quantity demanded, %DQ, is calculated as DQ/Qave, which is 2/10 = 1/5. The percentage change in price, %DP, is calculated as DP/Pave, which is $1/$20 = 1/20. The price elasticity of demand is %DQ/ %DP = (1/5)/(1/20) = 20/5 = 4. Some things about elasticity to keep in mind! It is the magnitude, or absolute value, of the measure that reveals how responsive the quantity change has been to a price change. If the percentage change in the quantity demanded equals the percentage change in price the price elasticity of demand equals 1 and the go...
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This note was uploaded on 03/29/2014 for the course ECON 101 taught by Professor Vanderwaal during the Spring '08 term at Waterloo.
 Spring '08
 VANDERWAAL
 Microeconomics

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