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Utility and Elasticity PDF
Utility and Elasticity PDF
Demand
PED is a measure of how demand for a good changes in relation Inelastic Demand
to a change in price. If a good is:
% Change in Q % Change in P
Elastic: Demand changes greatly in response to price changes
(PED will be greater than 1 if demand is elastic).
Cross-Price
Unit elastic: When the percentage change in quantity % Change in Q (Good X)
Elasticity of
demanded is equal to that in price.
Demand % Change in P (Good Y)
Inelastic: Demand changes slightly in response to price changes (CPED)
(PED will be less than 1 if demand is inelastic).
Demand (cont.)
Supply