BUSAD 120 Lecture Notes - Lecture 32: Demand Curve, Time Horizon
Document Summary
Measures how much demand responds to changes in its determinants. Measures how much supply responds to changes in its determinants. Elasticity allows analysis of supply and demand with greater precision (that does not depend on units of measurement). The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good. It allows us to conclude whether quantity demanded responds a lot or a little to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Say a 10% increase in price leads to a 20% decrease in quantity demanded. Elasticity of demand is just a number. It allows us to compare the responsiveness to price for goods with different measures of quantity (eg kilos, litres) and different currencies (eg dollars, euros)
