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Chapter 5: Elasticity of Demand and Supply
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Price Elasticity of Demand
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Measures how responsive quantity demanded is to a price change, the percentage change in quantity demanded divided by the percentage change in price
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Terms in this set (20)
Price Elasticity of Demand
Measures how responsive quantity demanded is to a price change, the percentage change in quantity demanded divided by the percentage change in price
Price Elasticity Formula
Percentage change in quantity demanded divided by the percentage change in price; the average quantity and the average price are used as bases for computing percentage changes in quantity and in price
Inelastic Demand
Demand A change in price has relatively little effect on quantity demanded; the percentage change in quantity demanded is less than the percentage change in price; the resulting price elasticity has an absolute value less than 1
Unit-Elastic Demand
Demand the percentage change in quantity demanded equals the percentage change in price; the resulting price elasticity has an absolute value of 1
Elastic Demand
A change in price has a relatively large effect on quantity demanded; the percentage change in quantity demanded exceeds the percentage change in price; the resulting price elasticity has an absolute value exceeding 1