ECON 1050 Chapter Notes - Chapter 4: Demand Curve, Avex Group, Normal Good
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Price elasticity of demand: 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 buyer"s plans remain the same. If the demand curve is steep, the quantity demanded of the good/service isn"t very responsive to a change in price. If the demand curve is almost flat, the quantity demanded is very responsive to a change in price. Price elasticity of demand = percentage change in quantity demanded. To calculate the price elasticity of demand change is expressed as a percentage of the average price and the percentage of the average quantity. I. e. original price . 50 changes to . 50, calculated as. Original quantity demand 9, new quantity demanded 11. % p = p/pave x 100 = (/) x 100 = 5% % q = q/qave x 100 = (2/10) x 100 = 20% Price elasticity of demand is a unit-free measure, and is an absolute value.