ECON 1000 Lecture Notes - Arc Elasticity, Net Impact, Demand Curve
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ECON 1000 Full Course Notes
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Price elasticity of demand: indicates consumer response to price change. It measured as the percentage change in quantity demanded, divided by the percentage change in price. It is better to use percentage change because the measure is unit free, this way the goods of varying prices may be compared. The demand curve is horizontal where a quantity changes results from a 0 percentage. The demand curve is vertical where no quantity results from the change in price. change in price. (elasticity is infinite) (elasticity has a 0 value) Omit the negative sign when writing the elasticity. The higher the absolute value of elasticity, the higher the sensitivity (high prices). At high prices elasticity is high; at low prices elasticity is low. Price elasticity of demand = percentage change in the quantity demanded = % q. % p p/(average)p p q (responsiveness of quantity demanded to change in price)