Textbook Notes (363,472)
Economics (586)
ECON 101 (211)
Chapter 6

# Chapter 6 - Markets in Action.docx

2 Pages
67 Views

School
University of Waterloo
Department
Economics
Course
ECON 101
Professor
Shi Lei Niu
Semester
Winter

Description
CHAPTER 4 – ELASTICITY Price Elasticity of Demand The price elasticity of demand is a units-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers’ plans remain the same Calculating Price Elasticity of Demand  Price Elasticity of Demand = percentage change in Q demanded / Percentage change in P  The ratio of two percentage changes  Units-free measure because percentage change in each variable is independent of units which the variables are measured  When P of good rises, Q demanded decreases  Positive change in price beings negative change in Q -> price elasticity is negative  Absolute value of price elasticity = how responsive/elastic demand is Inelastic and Elastic Demand  If Q demanded remains constant when P changes, price elasticity of demand is zero = perfectly inelastic demand  If % change in Q demanded = % change in P, then price elasticity is one = unit elastic demand  If elasticity of demand is between zero and 1 then inelastic demand  If Q demanded changes by large % in response to tiny price change, price elasticity of demand is infinity and good is perfectly elastic demand  If % change in Q demanded exceeds % change in P then elastic demand Total Revenue and Elasticity  Total revenue from sale of good equals price of good x quantity sold  If D is elastic, a 1% P cut increases Q sold by more than 1% and TR increases  If D is inelastic, a 1% P cut increases Q sold by less than 1% and TR decreas
More Less

Related notes for ECON 101

OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.