ECON101 Chapter Notes - Chapter 6: Price Ceiling, Economic Equilibrium
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ECON101 Full Course Notes
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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. Price elasticity of demand = percentage change in q demanded / percentage change in p. 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. 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.