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Elasticity

Terms in this set (12)

Elasticity
sensitivity of demand/supply to change in market
changes in market
price, income, demand for other good
price elasticity of demand
sensitivity of Qd to change in price
Interpretation of PED( RULE OF THUMB)
ED < 1 means inelastic
ED = 1 means unitary
ED > 1 means elastic
price elastic
price is a big deal for people to demand
price inelastic
demand doesn't change due to price
unitary
% change for Demand = % change for price
determinants for PED
• Availability of substitutes
• Specificity of good
• Percentage of income
• Necessity
• Duration of price change
• Brand loyalty
Perfectly elastic demand
Any change in price causes
quantity demanded to drop to 0.
Perfectly inelastic demand
Demand does not change
regardless of price.
Relatively inelastic demand
little % change of Price, little % change of Qd
Relatively elastic demand
little % change of Price, a lot of change in Qd
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