ECN 104 Lecture Notes - Lecture 4: Demand Curve, Price Elasticity Of Demand
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Ecn 104 - lecture 4 - elasticity part 1. An increase in price causes a decrease in quantity demand and vice- versa. Elasticity gives us a measure of responsiveness. When qd responds strongly to a change in p, demand is elastic. When qd responds weakly to a change in p, demand is inelastic. Note that with both elastic and inelastic demand, consumers behave according to the law of demand. The terms elastic or inelastic describe the degree of responsiveness. Ed=percentage change in quantity percentage change in price. Using two price-quantity combinations of a demand schedule, calculate the percentage change in quantity by dividing the absolute change in quantity by one of the two original quantities. Then calculate the percentage change in price by dividing the absolute change in price by one of the two original prices. Absolute changes depend on choice of units. If tr changes in the opposite direction from price, demand is elastic.