【正文】 Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Ine Elasticity of Demand ?Ine elasticity of demand measures how much the quantity demanded of a good responds to a change in consumers’ ine. ?It is puted as the percentage change in the quantity demanded divided by the percentage change in ine. Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Elasticity and Total Revenue: Inelastic Demand $3 Quantity 0 Price 80 Revenue = $240 Demand $1 Demand Quantity 0 Revenue = $100 100 Price An increase in price from $1 to $3... …leads to an increase in total revenue from$100 to $240 Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Perfectly Elastic Demand Elasticity equals infinity Quantity Price Demand $4 1. At any price above $4, quantity demanded is zero. 2. At exactly $4, consumers will buy any quantity. 3. At a price below $4, quantity demanded is infinite. Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Perfectly Inelastic Demand Elasticity equals 0 Quantity Price 4 $5 Demand 100 2. ...leaves the quantity demanded unchanged. 1. An increase in price... Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Ranges of Elasticity Inelastic Demand ?Quantity demanded does not respond strongly to price changes. ?Price elasticity of demand is less than one. Elastic Demand ?Quantity demanded responds strongly to changes in price. ?Price elasticity of demand is greater than one. Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Computing the Price Elasticity of Demand The price elasticity of demand is puted as the percentage change in the quantity demanded divided by the percentage change in price. P ri c e E la s tic ity o f De m a nd =P e rc e nta ge C ha ng ein Q ua ntit y D e m a nd e dP e rc e nta ge C ha ng ein P ri c eP ri c e E la s tic ity o f De m a n d =P e rc e n ta g e C h a n g ein Q u a n tit y D e m a n d e dP e rc e n ta g e C h a n g ein P ri c eHarcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Elasticity . . . ? … is a measure of how much buyers and sellers respond to changes in market conditions ? … allows us to analyze supply and demand with greater precision. Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 328876777. Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Determinants of Price Elasticity of Demand Demand tends to be more elastic : ?if the good is a luxury. ?the longer the time period. ?the larger the number of close substitutes. ?the more narrowly defined the market. Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. Computing the Price Elasticity of Demand Example: If the price of an ice cream cone increases from $ to $ and the amount you buy falls from 10 to 8 cones the your elasticity of demand, using the midpoint formula, would be calculated as: 222/)()(2/)810()810(??????pe r c e ntpe r c e nt) / 2]P) / [ ( PP(P) / 2]Q) / [ ( (Q=D e m a nd of E l a s t i c i t y P r i c e12121212????Harcourt, Inc. items and derived items copyright 169。 2021 by Harcourt, Inc. A Variety of Demand Curves Because the price elasticity of demand measures how much quantity demanded responds to the price, it is closely related to the slope of the demand curve. Harcourt, Inc. items and derived items copyr