Step 5: No, no, not rubber band. DEmand. How elastic.

Price Elasticity of Demand

-tells how drastically buyers will cut back or increase their demand for a good when a price rises or falls

-elastic goods - wants

1. Elastic Demand - when demand changes greatly due to a change in price
   -e > 1
2. Inelastic Demand - where demand does not change, even if price does; few substitutes
   -e < 1
3. Unitary Elastic Demand - perfect, ideal situation, does not happen
   -e = 1

How to find Price Elasticity of Demand

• Find %∆ in Quantity   (New Quantity-Old Quantity)/Old Quantity = ∆ in Quantity

• Find %∆ in Price          (New Price-Old Price)/Old Price = ∆ in Price

• Compute PED              |∆ in Quantity/∆ in Price| = PED