ECON 208 Chapter Notes - Chapter 4: Diet Pepsi, Excise, Inferior Good
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ECON 208 Full Course Notes
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Demand elastic when quantity demanded is quite responsive to changes in price. When quantity demanded is relatively unresponsive to changes in price, demand is inelastic. The more responsive the quantity demanded is to changes in price, the less the change in equilibrium price and the > the change in equilibrium quantity resulting from any given shift in the supply curve. Price elasticity of demand ( ): a measure of the responsiveness of quantity demanded to a change in the commodity"s own price. = %age change in quantity demanded. The use of avg price and quantity in computing elasticity. Using avg values for price+demand = measured elasticity of demand on demand curve between. A and b is independent of whether the movement is from a b or b-a. Negative slope of demand curve = ^price = decrease in quantity demanded. Since %age changes in price+quantity have opposite signs, demand elasticity ve.