In this lesson I am briefly teaching the formulas behind price elasticity of demand. I teach the point price elasticity of demand formula and the ARC price elasticity of demand formula which contains the mid-point formula. I also cover what the values mean. A PED greater the 1 is inelastic, a value less than 1 is elastic and a value equal to 1 is unit elastic. The goal is to have a ped of 1 which is the price where revenues will be maxed.
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Three minutes ago (before I watched this video) I was 100% convinced there was no way I was going to pass my Econ class. THANK YOU. I finally got it! Your video explained it in a way that made sense to me. I just got it right on my homework (it's online so I get the answers immediately) THANK YOU!!! I will be sharing this link with the rest of my class.
A simpler way to calculate elasticity is %Change in Q / %Change in P
simply take the magnitude of change in the number, and divide it by the original.
If the price changed from 10 to 8, the change in price is 2. Divide this change by the original (10) and your change in price is 20%. This percentage change will be identical if the price changed from 10 to 12.
Correct me if I'm wrong, I'm a first year econ student.
too wordy telling me about negatives threw me off when honestly if you work the problem with logic before that you'd just end up with negative and wouldnt have to be told HOWEVER the unit elastic definition did indeed help.
Great video! Clear and concise. I'm still needing to learn how to plot points on the curve. If you can discuss that in the future, I believe it would be a great asset. I'll check around to try and find it. Thanks.
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