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The Elasticity of Demand

The Elasticity of Demand. Chapter 4 Section 3. What is Elasticity?. Elasticity – The measure of sensitivity that a product has to a change in price. Elastic Demand – Change in price makes a significant impact on QD Inelastic Demand – Change in price makes an insignificant change in QD

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The Elasticity of Demand

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  1. The Elasticity of Demand Chapter 4 Section 3

  2. What is Elasticity? • Elasticity – The measure of sensitivity that a product has to a change in price. • Elastic Demand – Change in price makes a significant impact on QD • Inelastic Demand – Change in price makes an insignificant change in QD • Unit Elastic Demand – Change in price causes a proportional change in QD

  3. What does it look like? Elastic Demand A Small Change in Price Huge change in QD P QD

  4. Inelastic Demand Curve – A change in Price Causes a relatively small change in QD P QD

  5. Unit Elastic Demand Curve – A Change in Price Causes a Proportional Change P In QD QD

  6. Determining Elasticity • To determine a product’s elasticity we ask 3 questions…(Page 106) • Can purchase be delayed? • Are adequate substitutes available? • Does the purchase make up a large portion of income?

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