Economics 1021A/B Lecture 5: Lecture 5 (Chapter 4)
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ECON 1021A/B Full Course Notes
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Price elasticity of demand = percentage change in quantity demanded. This measures the responsiveness of the change in a demand of a product when the price of this product changes, assuming all other influences stay the same. We find the nominator and denominator by calculating averages for demand and price. The original price plus the new price, divided by 2, then put the difference between original and new over that average. If the quantity demanded does not change when the price changes then then it is called a perfectly inelastic demandelasticity = 0. If the percentage change of price and demand are equal, the elasticity = 1. And good within the range of these two: 0 to 1 is said to have an inelastic demand. If the quantity demanded changes by an infinity large percentage for every tiny price change, it is said to have a perfectly elastic demand.