ECON 1000 Lecture Notes - Lecture 4: Inferior Good
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The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. = percentage change in quantity demanded = change in q/ q average. Percentage change in price change in p/ p average. No change to total revenue, qs > 1% The elasticity of demand for a good depends on . The closer the substitutes for a good or service, the more elastic are the demand for the good or service i. e. ) The proportion of income spent on the good. The greater the proportion of income consumers spend on a good, the larger is the elasticity of demand for that good. The time elapsed since a price change. The more time consumers have to adjust to a price change, the more elastic is the demand for that good.