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Ch. 5 Handouts on ElasticityElasticity: measures the responsiveness of one factor due to a change in another factor Measures the percentage change in a dependent variable, Y, resulting from a 1% change
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How to fill out price elasticity of demand

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Step 1: Determine the initial price and quantity demanded.
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Step 2: Change the price by a small percentage. For example, increase the price by 5%.
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Step 3: Measure the resulting change in quantity demanded.
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Step 4: Calculate the price elasticity of demand using the formula: Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price).
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Step 5: Interpret the calculated price elasticity of demand. If the value is greater than 1, it indicates elastic demand. If it is less than 1, it indicates inelastic demand.
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Step 6: Repeat steps 2-5 for different price changes to gather more data and analyze the responsiveness of demand to price fluctuations.

Who needs price elasticity of demand?

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Price elasticity of demand is important for businesses, especially those involved in pricing strategies.
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It is useful for economists and market researchers to understand consumer behavior and predict market outcomes.
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Government agencies may need price elasticity of demand to assess the impact of taxes or subsidies on consumer demand.
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Investors and financial analysts may use it to evaluate the potential profitability of a product or industry.
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Academics and students studying economics and related fields benefit from understanding price elasticity as a fundamental concept.

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Price elasticity of demand measures how the quantity demanded of a good changes in response to a change in its price.
Typically, businesses that engage in significant pricing strategies or market analysis may be required to file reports on price elasticity of demand.
To fill out a report on price elasticity of demand, one must calculate the percentage change in quantity demanded divided by the percentage change in price, then document this information in the required format.
The purpose of price elasticity of demand is to understand consumer behavior in response to price changes, helping businesses and policymakers make informed decisions.
The report should include data on quantity demanded, price changes, and the computed elasticity value.
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