Elasticity of Demand

Elasticity of Demand
 Elastic Demand-
 A product is elastic when demand changes greatly given a small change in prize.

•  Many substitutes
• Luxury good

Ex: cars, coke, steak

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Inelastic demand-
A product is said to be inelastic if the demand for it will not change or change very little regarding to prize

• few substitutes
• necessary

Ex:  Heart medicine, gas, Milk
<1
PED
Change in quantity:

New- Old
    Old
Change in prize:

New- Old 
    Old
Ped:

Change in quantity
Change in Prize

Revenue:
P x Q