ECON 1000 Chapter 4: ECON1000 Lecture 6 Elasticity OneNotes NoteTaker
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: a units-free measure (only the magnitude is important) 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. = % change in quantity demanded/% change in price. Qave: equals the average of the initial and the new quantities. Pave: equals the average of the initial and the new prices: example, 1. Or, (2/10) * 100 = 20: 2. Or , (1/20) * 100 = 5: 3. Thus, the price elasticity of demand is (2/10)/(1/20) = 4. Demand curve is a vertical line: perfectly elastic demand. Total revenue and elasticity: total revenue = price * quantity, r: p and/or q. Factors that influence the elasticity of demand: the elasticity of demand for good depends on, the closeness of substitutes the closer the substitutes for a good/service, the more elastic is the demand for it.