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
Q_{2} - Q_{1 } P_{2} + P_{1 }
————— X —————
Q_{2} + Q_{1 }P_{2} - P_{1}
Inelastic demand
elasticity less than 1
If elasticity is exactly 1
it is called unit elastic
Perfect elasticity
Perfrectly horizontal line on graph
perfect inelasticity
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