Chapter 3&4 - Supply and Demand
Elasticity of Demand
- a measure of how consumers react in a change of price
What is Elastic Demand?
- demand that is very sensitive to a change in price
- E > 1
- the product is not necessity and there are available substitute
ex: Soda
Steak
Candy
Fur Coats
What is Inelastic Demand?
- demand that is not sensitive to a change in price
- E < 1
- there are few to no substitute product is necessity
- people will always buy
ex: Gas
Salt
Milk
Insulin/Medicine
Price Elasticity of Demand (PED)
Step 1: Quantity
(New Quantity - Old Quantity) / Old Quantity
Step 2: Price
(New Price - Old Price / Old Price)
Step 3: PED
% Δ in quantity demanded / % Δ in price
Your Supply and Demand notes made it easier for me to understand what's more important, because of the each and everyone you highlighted helps me understand it easier.
ReplyDeleteLets try and not forget about unitary demand when the elasticity is equal to 0
ReplyDelete