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Elasticity of Demand

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 2 types 1. Elastic = small change in P causes a large change in Q demanded example = fresh fruit.

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Elasticity of Demand

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  1. Elasticity of Demand Chapter 4 Section 3

  2. Demand Elasticity • Demand Elasticity: the extent to which a change in P causes a change in the Q demanded 2 types • 1. Elastic = small change in P causes a large change in Q demanded • example = fresh fruit

  3. 2. Inelastic = a change in P causes a smaller change or no change in Q demanded • Example: gas

  4. 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)

  5. Determinants of Elasticity If NO = inelastic If YES = elastic

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