Elasticity demand-measures of how consumers react to price
Elastic Demand- very sensitive to change in price, E>1
Product is not a necessity
Avail. substitutes
Inelastic Demand- Not very sensitive to change in price, E<1
Product is a necessity
Few or no substitutes
People will buy no matter what
Unit/Unitary Elastic- E=1
Elastic(Sbs avail)
Soda
Steaks
Inelastic(No Sbs)
Gas
insulin
Price Elasticity of Demand(PED)- 3 step formula
Quantity
(New quantity- Old Quantity) / old quantity
Price
(New price- Old price)/ Old price
PED
(% Change in quantity Demand )/(%change in price)
Total Revenue- Total amount of money that a firm receives from selling goods and services
TR=PxQ
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