ECON 1050 Chapter Notes - Chapter 4: Inferior Good, Normal Good, Longrun
Document Summary
Price elasicity of demand- units-free measure of the responsiveness of the quanity demanded of a good to change in its price when all other inluences on buying plans remain the same. To calculate the price elasicity of demand, we express the change in price as a percentage of the average price and average quanity, demanded as a percentage of the average quanity. Average price and average quanity gives the most precise measurement of elasicity- at the midpoint between the original price and the new price. Elasicity is the raio of two percentage changes so when we divide one by the other, the 100s cancel. A percentage change is a proporionate change muliplied by 100. Elasicity is a unit free measure because the percentage change in each variable is independent of the units in which the variable is measured. The raio of the 2 percentages is a number without units.