ECO100Y5 Chapter Notes - Chapter 6: Tennis Ball, Midpoint Method, Plus And Minus Signs
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ECO100Y5 Full Course Notes
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Price elasticity of demand ratio of percentage change in quantity demanded to the percentage change in price. Elasticity is a general measure of responsiveness that can be used to answer such questions. Minus sign is dropped, absolute value is usually reported (positive) The larger the price elasticity more responsible quantity demanded is to the price. When price elasticity of demand is large (when consumers change their quantity demanded by a large percentage compared to change in price) economists says demand is high elasticity. An alternative (and better) way to calculate elasticity: midpoint method. Midpoint method technique for calculating percentage change. In this approach we calculate changes in a variable compared with the average of the starting and final values. X = either price or quantity demanded, whichever you"re trying to figure out. Starting value of x + final value of x. P 2 p 1 ( p 1+ p 2)/ 2 x 100 x 100.