Chapter 7: Elasticity, Microeconomics Policy, and Consumer Theory

\
### __**Elasticity of demand (ED)**__

* It’s a measure of the responsiveness of consumers to change in price
* If a firm increases price of their product, would consumers still buy it?
* If a demand for a product is inelastic, change in price wouldn’t impact the consumers much e.g. cancer medicines
* If the demand for a product is elastic, change in price would impact the quantity purchased of that product
* The following is the formula to calculate the ED
* %change in Qd / %change in Price
* Economists ignore the negative value of PED
* The greater the value, the more sensitive consumers are to a change in the price of good X
* The answer that is received falls under the following ranges, each with their own interpretation

| ]]Type of Elasticity]] | ]]Elasticity value]] |
|----|----|
| Perfectly inelastic | 0 |
| Relatively Inelastic |