ECON 1050 Chapter Notes - Chapter 4: Inferior Good, Demand Curve, Normal Good
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This depends on the responsiveness of the quantity demanded to a change in price: different outcomes arise from differing degrees of responsiveness of the quantity demanded to change a price (responsiveness = slope) The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to change in its price when all other influences on buying plans remain the same. Calculating price elasticity of demand: calculate % change in price: % change p= (change p) / p average x 100 = . , calculate % change in quantity demanded : % change in quantity / quantity. Average x 100=. : calculate price elasticity of demand by plugging in answers from step 1 & 2: price. Elasticity of demand = % change in q / % change in p = Larger the magnitude of the price of elasticity of demand, the greater is the responsiveness of the quantity demanded to a given price change.