Whateffectdoesachangeinpricehaveonthequantity.pptVIP

What effect does a change in price have on the quantity demanded? Elasticity of demand is the response to price change for different goods How do different goods respond to being dropped? An anology If the response of quantity demanded to a price change is proportional It’s called unit elastic Suppose gas cost $3.00 a gallon But now it’s $3.50 (3/3.5=.857) .5/{6.5/2} = .5/3.25 = .15 or 15% If you had previously bought 40 gallons a week, about how many would you purchase if gas is unit elastic? .857 X 30 = 25.71 30 – 25.71 = 4.29 4.29/{55.71/2} = 4.29/27.85 =.15 Qualities that affectElasti