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Chapter 5

Chapter 5 Summary (got 93% on the test)

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ECON 2000
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Chapter 5 Summary1 Elasticity is a general measure of responsiveness that can be used to quantify many different relationships If one variable A changes in response to changes in another variable B the elasticity of A with respect to B is equal to thechange in A divided by thechange in B 2 The slope of a demand curve in an inadequate measure of responsiveness bc its value depends on the units of measurement used For this reason elasticities are calculated using percentagesPRICE ELASTICITY OF DEMAND p983 Price elasticity of demand is the ratio of thechange in Qd of a good to thechange in P of that good4 Perfectly inelastic demand is demand whose Qd does NOT respond at all to changes in P its numerical value is 05 Inelastic demand is demand whose Qd responds somewhat but not a great deal to changes in P its numerical value is between 016 Elastic demand is demand in which thechange in Qd is larger in absolute value than thechange in P Its numerical value is less than 1 7 Unit
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