Price Elasticity of Demand:

Price Elasticity of demand:

-Tells us how drastic buyers will cut back or increase their demand for a good when the price rises or falls.

• 3types: Elastic demand, Inelastic demand, unitary elastic demand.

-Elastic demand: product is said to be elastic when demand will change greatly given a small change in price. Has many substitutes. Wants such as steak, fur coat. Number is greater than one.

-Inelastic demand: product is said to be inelastic if the demand for it will not change regardless of price. Needs such as water, gas, few substitutes. Number is less than one.

-Unitary elastic demand: perfect society, equal to one.

TR: Total revenue: Price * Quantity - Uses $ (dollar) sign.

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