Micro Chap. 4

Measures the percentage change in quantity demanded of a good when ist price changes. / Theprice elasticity of demand (sometimes simply calledprice elasticity) measures how much the quantity demanded of a good changes when its price changes. The precise def nition of price elasticity is the percentage change in quantity demanded divided by the percentage change in price. The price elasticities of demand for individual goods are determined by the economic characteristics of demand. Price elasticities tend to be higher when the goods are luxuries, when substitutes are available, and when consumers have more time to adjust their behavior. By contrast, elasticities are lower for necessities, for goods with few substtutes, and for the short run.

Measures the percentage change in quantity supplied of a good when ist price changes. / More precisely, theprice elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.

Percentage change in quantity demanded is greater than percentage change in price (>1 or infinite)

Percentage change in quantity dtmanded is less than percentage change in price (<1 or 0)