1. Chapter 4.3 notes
Demand Elasticity

2. Demand Elasticity HOW MUCH a change in P causes a change in Qd
Elastic – when a change in P causes a relatively larger change in Qd. Ex: green beans, corn, tomatoes, etc.

3. cont’d
Inelastic – a change in P causes a relatively smaller change in the quantity demanded. Ex: table salt, gas
Unit Elastic – a given change in price causes a proportional change in quantity demanded.

4. Calculating Demand Elasticity
Demand Elasticity = %ΔQd
%ΔP
If the numerator is > denominator = elastic
If the denominator is > numerator = inelastic

5. Determinants of D Elasticity
Necessities vs. Luxuries – Necessities usually inelastic
Substitutes goods/services - If no sub, usually inelastic
Portion of income – if uses a large portion of income, usually elastic

6. Rank the following items from most elastic to least elastic
Honda Accord
Beef
European vacation
Salt
Dijon mustard
steak

7. Results…?
European Vacation
Honda Accord
Steak
Dijon mustard
Beef
salt