ECON 1050 Lecture 3: ch 3 econ
Document Summary
Price elasticity is a units-free measure of the responsiveness of the quantity demanded of a good to change in it price when all other in uences on buying planes remain the same. Perfectly inelastic demand-the quantity demanded remains constant when the price changes, then the price elasticity of demand is 0 and the good is perfect inelastic. Unit elastic the percentage change in the quantity demanded equals the percentage change in the price, then the price elasticity = 1. Inelastic demand-the price elasticity of demand is between 0 and 1. Perfectly inelastic demand the quantity demanded changes by an in nitely large percentage in response to a tiny price change. Elastic demand - price elasticity that is greater than 1. Factors that in uence the elasticity of demand the closer the subs the more elastic the demand is: closeness of substitutes. Necessities food and shelter luxuries-exotic value: proportion of income spent on the good.