Eco Notes 3 Unit 1 1/12/15

Eco Notes 3 1/12/15

Elasticity of Demand- tells how drastically buyers will cut back or increase demand for a good when price rises or falls

Elastic Demand- (E>1) Demand will change greatly given a small change in price Ex. Wants, movie tickets

Inelastic- (E<1) demand for a product will not change regardless of price Ex. Needs, Gas, milk salt

Unit elastic (E=1)

1-New Quantity – Old Quantity /Old quantity= -.2

2- New price- old price / old price= .5

3- PED- Price Elasticity of Demand

    %change in quantity/ %change in price= .4 <1 inelastic

1-(-.2)

2-.25

3-.8 < 1 inelastic