ECON 1000 Lecture Notes - Inferior Good, Normal Good

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ECON 1000 Full Course Notes
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ECON 1000 Full Course Notes
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A measure of the responsiveness of the quantity demanded to a price change. The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers" plans remain the same. The price elasticity of demand is calculated by using the formula: Percentage change in price if =1, unit elastic demand. (new quantity- original quantity) /quantity average (new price original price)/ price average. If the quantity demanded doesn"t change when the price changes, the price elasticity of demand is zero and the good as a perfectly inelastic demand. if <1, inelastic demand if >1, elastic demand. The total revenue price * demand (when the price changes, total revenue also changes. But a rise in price doesn"t always increase total revenue. ) The change in total revenue due to a change in price depends on the elasticity of demand:

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