Elasticity of Demand

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# Elasticity of Demand - PowerPoint PPT Presentation

Elasticity of Demand. Chapter 4 Section 3. Demand Elasticity. Demand Elasticity : the extent to which a change in P causes a change in the Q demanded 3 types 1. Elastic = small change in P causes a large change in Q demanded example = fresh fruit.

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## PowerPoint Slideshow about 'Elasticity of Demand' - gefjun

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### Elasticity of Demand

Chapter 4 Section 3

Demand Elasticity
• Demand Elasticity: the extent to which a change in P causes a change in the Q demanded

3 types

• 1. Elastic = small change in P causes a large change in Q demanded
• example = fresh fruit
2. Inelastic = a change in P causes a smaller change or no change in Q demanded
• Example: table salt or gasoline
• 3. Unit = % change in P = % change in Q demanded
Total Expenditures Test
• Multiply the price by the quantity
Specific vs. General Market

Examples:

• Specific: Exxon Gas Station
• If P increases, people would go somewhere else, therefore it is elastic (flexible)
• General: All Gas Stations
• If P increases, people will have to pay the increase, therefore it is inelastic (nonflexible)
Determinants of Demand Elasticity
• If 2 or more NO = usually inelastic
• If 2 or more YES = usually elastic