Elasticity 11/9/11

• Elasticity - % change in quantity demanded / % change in whatever you are interested in
• > 1 means demand at that point is "elastic" (quantity demanded is sensitive to price changes)
• = 1 means demand at the point is "unit elastic"
• < 1 means demand at that point is "inelastic" (quantity demanded is insensitive to price changes)
• What impacts Elasticity?
• Time
• Budgets
• Substitutes
• Elasticity of 2: Change in quantity demanded is double the change in prices
• Changes in the market may take time to occur and become apparent
• Elasticity is not constant along a demand curve