Wednesday, January 11, 2017

Elasticity of Demand

Elasticity of Demand (1/11)

  • A measure in how consumers react to a Δ in price

Elastic Demand

  • demand very sensitive to a Δ in price
  • product not a necessity
  • available substitutes
  • Ex - steak, fur coat, soda
  • E > 1

Inelastic Demand

  • demand not very sensitive to a Δ in price
  • product a necessity
  • few to none substitutes
  • Ex - gas, insulin
  • E < 1

Unitary Elastic

  • impossible in reality
  • E = 1

Calculation for Price Elasticity of Demand (PED)

  • Step 1: Quantity: new Q - old Q / old Q = %Δ in Q
  • Step 2: Price: new P - old P / old P = %Δ in P
  • Step 3: PED: %Δ in Q / %Δ in P = PED

1 comment:

  1. Maxwell, I think that you can improve the content by adding some graphs/pictures that would provide a visual for the notes you wrote. Additionally, you can also attach a video that would allow for people to learn more about the topic that you discussed. The dark grey background makes the blue font hard to read. Overall, the notes were concise and well-written.

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