Unit 11- Price Elasticity of Demand Flashcards
What does ∆ mean?
The amount changed
What is Elasticity?
The percent changed in Quantity divided by the percent changed in Price.
The percent changed in Quantity divided by the percent changed in Price.
Elasticity
(%∆Q) / (%∆P) = ?
Elasticity
Elasticity = ?
(%∆Q) / (%∆P)
A good is elastic when…
when the quantity sold is greater than the decrease in price
A good is inelastic when…
the price decreases are greater than the quantity sold
Revenue is…
Price * Quantity
When a good is elastic, how do you increase total revenue?
Decrease the price to increase the quantity sold
When a good is inelastic, how do you increase total revenue?
Increase the price to make more profit
Price Elasticity is determined by…
Availability of Substitutes and Budget
A flatter demand curve indicates…
Elasticity
A steeper demand curve indicates…
Inelasticity
