BUS 295 Lecture Notes - Lecture 30: Demand Curve
Document Summary
Elasticity of demand: measures how much demand responds to changes in its determinants (price elasticity of demand, income elasticity demand, cross-price elasticity of demand) Elasticity of supply: measures how much supply responds to changes in its determinants (price elasticity of supply. Elasticity allows analysis of supply and demand with greater precision (that does not depend on units of measurement) Calculated as the % change in quantity demanded divided by the % change in price. Elasticity of demand is just a number: allows us to compare the responsiveness to price for goods with different measures of quantity and different currencies. The price elasticity of demand is a number that tells you how quantity demanded changes in proportion to a given change in price. The higher the price elasticity of demand, the higher the responsiveness of quantity demanded to a change in price.
