EC120 Chapter Notes - Chapter 5: Hectare, Drug Education, Negative Number
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Elasticity is a measure of how much buyers and sellers respond to changes in market conditions. To measure how much consumers respond to the changes of supply and demand, economists use elasticity. Elasticity-a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. The price elasticity of demand and its determinants. Price elasticity of demand-a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price. The elasticity reflects the many economic, social, and psychological forces that shape consider tastes. General rules about what determines the price elasticity of demand: