The
Elasticity
of
Demand
•
The elasticity of demand for a good or service
measures the change in quantity demanded in
response to a change in price
–
In other words, elasticity measures the sensitivity
(measured in percentage change) of quantity
demanded because of a change (percentage) in price
–
When price goes up,
demanded declines.
we
know that
quantity
•
But we don’t know by how much?
–
Elasticity
response
provides
us
a
way of
measuring
this
•
Elasticity answers the “how much” question
Copyright
2002 by The McGrawHill Companies, Inc.
All rights reserved.
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