The Elasticity of Demand (Own-Price) What does the demand elasticity tell us Demand is elastic Elasticity > |1| (< -1) % Change in Qty Demanded is very price responsive Small increases -> large decreases in Qd and Revenues Small decreases -> large increases in Qd and Revenues Demand is unit elastic Elasticity = |1| (=-1) % change in Qd = % change in price -> no change in Revenues with price increases or decreases Demand is inelastic Elasticity < |1| (-1 < έ < 0) % Change in Qty Demanded is not very price responsive Increases in price -> little change in Qd and larger increases in Revenu Decreases -> little change in Qd and decreases in Revenues
Elasticity and Total Revenue Unit elastic