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When elasticty is greater than 1
demand is elastic
You got a elasticty of 1.5. what does this mean?
A coefficient of 1.5 for price elasticity of demand means that for every 1 pecent chnage in price, there will be a corresponding 1.5 percent change in quantity demanded in the opposite direction of the price change. Demand is elastic.
price elasticity of demand formula
- Q2 - Q1 P2 + P1
- ————— X —————Q2 + Q1 P2 - P1
elasticity less than 1
If elasticity is exactly 1
it is called unit elastic
Perfrectly horizontal line on graph
perfect vertical line on graph
The more flat a demand curve is
the more elastic it is
on a demad curve....
very elastic at the top and progressively less elastic down the curve
something that is elastic
- - has a lot of substitutes
- - when price changes a little and quantity demanded changes a lot
something that is inelastic
- - has fewer substitutes
- - lots of price change and little change in quantity demanded
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