ECN 104 Chapter Notes - Chapter 5: Demand Curve, Midpoint Method, Ryerson University

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Basic idea elasticity measures how much one variable responds to changes in another variable: one type of elasticity measures how much demand for your websites will faill if you raise the price. Definition elasticity is a numerical measure of the responsiveness of q1 to q2. Price elasticity of demand = percentage change in q^d / percentage change in p: example: price elasticity of demand equals 15%/ 10% = 1. 5. Elasticity is a unit free measure (look at absolute value) Standard method of computing % change : (end value start value) / start value * 100% Use the midpoint method: (end value start value) / midpoint * 100: this is the default method economists use to work out elasticity. 250-200/225*100= 22. 2% ( q/q) / ( p/p ( q/ p) * p/q. The price elasticity of a demand is closely related to the slope of the demand curve.

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