ECON101 Chapter 4: Chapter 4 - Elasticity.docx
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ECON101 Full Course Notes
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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 buying plans remain the same. Formula: percentage change in quantity demanded/percentage change in price. Essentially, %dq / %dp = dq / dp. The percentage change in quantity demanded, %dq, is calculated as. Dq/qave x 100, which is (2/10) x 100 = 20%. The percentage change in price, %dp, is calculated as dp/pave x 100, which is (/) x 100 = 5%. By using average price and average quantity, we get the same elasticity value regardless of whether the price rises or falls. Since elasticity is a units-free measure or a ratio of percentages, a change in the units of measurement of price/quantity leaves the elasticity value the same. Demand can be inelastic, unit elastic, or elastic can range from zero to infinity.