Price Elasticity of Demand

-elasticity of demand-a measure of how consumers react to a change of price

-elastic demand-demand that is very sensitive to a change in price (E>1) product is NOT a
necessity and has several substitutes
EX) soda, candy, fur coat, steak

-inelastic demand-demand that is not very sensitive to a change in price (E<1) product is
a necessity and has few/no substitutes
EX) salt, milk, insulin, gas

-unitary elastic (E=1)

How to Calculate Price Elasticity:
1) (new quantity-old quantity)/old quantity
2) (new price-old price)/old price
3) Q/P
**round answers to 2 decimal places
-total revenue-total amount of money a firm receives from selling goods and services
(PxQ=TR)

Demand & Supply Notes:

Business Cycle