NOTES (1/14/15)- ELASTICITY

• Price Elasticity of Demand: tells how drastically buyers will cut back or increase their demands for a good when a price rises or falls
• (1) Elastic Demand- when demand changes greatly due to a change in price (E>1)
• (2) Inelastic Demand- demand will not change even if the price changes (E<1)
• (3) Unit Elastic- perfect ideal situations (E=1)

% Change in Quantity:

            new quantity - old quantity

                       old quantity

% Change in Price:

            new price - old price

                     old price

Price Elasticity of Demand:

      % change in quantity

        %change in price