ECON 2010 Lecture 11: Elasticity
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ECON 2010 Full Course Notes
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The price elasticity of demand measures how responsive quantity demanded is to a price change. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price that caused it. Elasticity is important because it measures the changes and helps us compare different goods and total revenue. This is good for the following reasons: Helps us to better understand the difference between competitive firms and monopolists. Elasticity can help us calculate changes over many different variables. It makes sense to just drop the minus symbol for the elasticity because it is a given that it will be a negative number. This is because if price increases, quantity decreases and vice versa. If a change in price leads to a larger percentage change in the quantity demanded; demand is said to be elastic.