4.2: Own Price Elasticity

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5 Terms

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own price elasticity of demand

% change in quantity demanded / % change in price

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2 ways of computing elasticity

  1. arc elasticity (starting point and end point) - for relatively larger changes, more inaccuracies

  2. point elasticity (specific points) - limits, more accurate


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computing elasticity - arc elasticity

  • large changes in price and quantity demanded

  • measures response of demand over a particular stretch of the demand curve

  • disadvantage: price sensitivity depends on the direction


<ul><li><p>large changes in price and quantity demanded</p></li><li><p>measures response of demand over a particular stretch of the demand curve </p></li><li><p>disadvantage: price sensitivity depends on the direction</p></li></ul><p></p>
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computing elasticity - point elasticity

  • small changes in price and quantity demanded

  • requires mathematical derivative


<ul><li><p>small changes in price and quantity demanded</p></li><li><p>requires mathematical derivative</p></li></ul><p></p>
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