Questions you will be able to answer:
- What impact does price have on demand?
- How can we measure the impact a price increase or decrease will have on demand?
- How can decision makers use this information?
Elasticity of Demand
Coefficient of demand = (% change in demand / % change in price)
Inelastic demand: Coefficient of demand < 1
Elastic Demand: Coefficient of demand > 1
Unitary Demand: Coefficient of demand = 1
Additional Practice and Review
Read Pages 95-97
Check Your Understanding 1-4