ECON 101 Chapter Notes - Chapter 4: Hyperbola, Price Elasticity Of Demand, Demand Curve
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ECON 101 Full Course Notes
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By how much will eq price and eq quantity change if there is a change in demand. Elastic qd is quite responsive to changes in price. To compare, both curves have to be drawn on the same scale and initial eq prices and quantities have to be the same. Usually more revealing to know the percentage changes (vs. absolute changes) in the prices of the various products. Price elasticity of demand responsiveness of qd to a change in the commodity"s price: % change in qd / % change in p, aka demand elasticity / own price elasticity of demand. The use of average price and quantity in computing elasticity: when a price or quantity changes, the change is a different percentage of the original value than it is of the new value. Independent of whether the movement is from a to b or from b to a ( q/avg. % increase in p = % decrease in qd.