ECON101 Chapter Notes - Chapter 4: Dell, Inferior Good, Normal Good
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ECON101 Full Course Notes
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Elasticity of demand: measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying plans remain the same. Note: ignore negative signs in calculating ped; use magnitude (absolute value) instead. 5) elastic demand: percentage change in quantity demanded is less than the percentage change in price(0 < ped <1; fraction). i. e. food and shelter is more than the percentage change in price (ped > 1). i. e. automobiles and furniture. Total revenue: price of good multiplied by quantity sold. Change in total revenue depends on the elasticity of demand: If demand is elastic, a 1 percent price cut increases the quantity sold by more than 1 percent and total revenue increases. If demand is inelastic, a 1 percent price cut increases the quantity sold by less than 1 percent and total revenue decreases.