Elasticity of Demand

Elastic Demand

1. Demand that is very sensitive to a change in price.
2. Not a necessity.
3. Available substitutes.
4. Steak, fur coat, or donuts.
5. E>1

Inelastic Demand

1. A necessity that doesn't sway with market prices.
2. Insulin, gasoline, and crack
3. E<1

Unitary Demand

1. E=1
2. Doesn't happen in real life.

Steps to find demand

1. Quantity
1. (new-old)/old
2. Price
1. (new-old)/old
3. PED (E)
1. Percent change of the quantity/percent change in price

The Elasticity of Demand. As the quantity demanded goes up, the price will go down. Also, as the price goes up, the quantity demanded goes down.