ECON 110 Chapter Notes - Chapter 4: Price Elasticity Of Demand, Demand Curve, Economic Equilibrium
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ECON 110 Full Course Notes
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Price elasticity of demand: a measure of the responsiveness of quantity demanded to a change in the commodity"s own price. Demand elasticities are computed using changes in price and quantity measured (avoids ambiguity) The numerical value of elasticity demanded can vary from 0 > : zero indicates a very large price change results in a small change in quantity demanded. The demand curve is vertical inelastic: occurs when an enormous change in quantity demanded results form a very small price change. The demand curve is horizontal elastic. Inelastic demand occurs when elasticity is less than 1: the % price is larger than the % quantity demanded. Elastic demand occurs when elasticity is greater than 1: the % quantity demanded is larger than the % price. Unit elastic occurs when % quantity demanded is equal to the % price. Elasticity of demand is mostly determined by the availability of substitutes and the time period under consideration.