ECON 101 Lecture Notes - Lecture 4: Economic Equilibrium, Normal Good, Cup Noodles
Document Summary
Demand is elastic when quantity demanded is quite responsive to changes in price. On the other hand, demand is inelastic when quantity demanded is relatively unresponsive to changes in price. Price elasticity of demand (ped) is a measure of responsiveness of quantity demanded to a change in the product"s own price. We know that demand curve have negative slopes. Because of this, percentage changes in price and quantity have opposite signs, therefore, demand elasticity is a negative number. The numerical value can vary from 0 to . means that elasticity is . Elasticity is 0 when a change in price leads to no change in quantity demanded. This is depicted as a vertical demand curve and its said to be perfectly inelastic. On the other hand, a perfectly elastic curve is depicted as a horizontal line. Inelastic demand is when a given percentage change in price is greater than the given percentage change in quantity demanded.