Price elasticity (1 Viewer)

[Le3sah]

Can someone please explain to me price elasticity? I have a test this following Wednesday and I’m confused lol.

Can you briefly outline Elastic demand, Unit elastic and Inelastic demand with one example for each...I'm reading the textbook right now and I haven’t a clue what it's on about.

Thanks heaps!!

 

[z600]

Price elasticity is how responsive the price is.

The demand for drugs are inelastic, that is they are unresponsive.
Inelastic =The percentage change in demand is less than the percentage change in price
E.g the percentage price of drugs rose by 10% but the demand only fell by 2%
And elastic is the opposite.

Unitary elastic means the percentage change in quantity demanded is equal to the percentage change in price.
E.g If demand rose by 5%, the price rose by 5% as well.

 

[Jachie]

Easy way to remember this:

Price UP Total Revenue UP - Inelastic (price does not effect demand, ie cigarettes or heroin or other 'addictive' substances, where consumers would simply find a way of paying whatever price is charged in order to receive the product)
Price UP Total Revenue DOWN - Elastic (price effects demand, ie a packet of chips, where consumers are likely to simply turn to a substitute good should the price be too high or unreasonable)
Price UP Total Revenue PROPORTIONATE TO CHANGE - Unit (price effects demand proportionately, a change in price causes an equal change in demand)

Everytime I see a question regarding price elasticity, I just draw three sets of arrows on the paper: two up, one up one down, and one up and a dash, to show me inelastic, elastic and unit.