ECO 211 Chapter Notes - Chapter 4: Ceteris Paribus, Demand Curve, Hyperbola
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ECO 211 Full Course Notes
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If price goes up by 10% and quantity demanded went down by 10% the elasticity is 1 (it"s the ratio) The responsiveness of the quantity demanded to price. The question is how much quantity will decrease in response to a given price increase. We want a measure that is units free and can be compared across different commodities. You can say one good is more sensitive than another. The measure we will study that meets the criteria we want is the price elasticity of demand. Price elasticity of demand is a measure of the responsiveness of the quantity demanded of a good to a change in. Price elasticity of demand its price (ceteris paribus). Elastic demand - means demand is sensitive to price. Inelastic demand - means demand is insensitive to price. The changes in price and quantity are expressed as percentages of the average price and average quantity between the two prices and quantities being compared.