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Transcript of Elasticity Presentation
= (1/20.50)x100 / (2/9)x100
=4.87 / 22.23
=0.22 Hint : Percentage Change = (change/original)x100 Elastic - Consumers are responsive to a change in price Inelastic - Consumers are not very responsive to a change in price Inelastic and Elastic Demand PED = 0 PED = infinity Quantity remains constant as Price changes Price remains constant as Quantity changes Elasticity along a linear demand curve Elasticity and Revenue Factors effecting elasticity of demand Pricing strategy How change in income affects sales Taxing goods Helpful to industries using complementary goods Helpful to industries using substitutes to predict the effect of a cut in prices on competitors sales Elasticity decreases as price falls and the quantity demanded increases Demand is unit elastic at the midpoint At prices above the midpoint demand is elastic At prices below the midpoint demand is inelastic Number and closeness of substitutes The proportion of income for which the good accounts The influence of habit PED = 1 Quantity demanded is proportionate to Price A normal good A good for which as income rises, demand rises too. Income Inelastic Goods The product is completely insensitive to changes in income Inferior Goods A good is one for which as incomes rise, demands falls Complements Substitutes In the long run In the momentary period