3.1 Elasticity
Managers commonly summarize the responsiveness of one variable—such as the quantity demanded—to a change in another—such as price—using a measure called an elasticity, which is the percentage change in one variable divided by the associated percentage change in the other variable. In particular, a manager can use the elasticity of demand to determine how the quantity demanded varies with price.
The Price Elasticity of Demand
In making critical decisions about pricing, a manager needs to know how a change in price affects the quantity sold. The price elasticity of demand (or simply the elasticity of demand or the demand elasticity) is the percentage change in quantity demanded, Q, divided by the percentage change in price, p. That ...
Get Managerial Economics and Strategy, 2/e now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
