ECON 2000 Chapter : Econ Chapter Five
Document Summary
Elasticity of demand: when discussing consumer reactions to price changes, and the subsequent change in quantity. Average: using the numbers taken from the demand schedule, the price elasticity of demand may be calculated, price elasticity is measured point by point (i. e. a to b, b to c; not a to c). Given we are measuring % changes, recall what happens to a given 100 units of quantity if a flat 10% is subtracted over and again. Changes in qd proportional with changes in price: perfectly elastic demand: should the resulting ed = infinity, then the demand curve will be flat. Consumers will buy all units at one price, but no units above or below: this represents an extreme circumstance, perfectly inelastic demand: a condition where qd does not change regardless of price. A new lower price will yield a relatively larger increase in units sold: the effect upon total revenue will reflect the reactive swings in demand, elastic demand:
