Elasticity of Demand- a measure of how consumers react to a change in price
- Elastic Demand- demand that is very sensitive to a change in price. E>1, the product is not a need and have substitutes
- Inelastic Demand- demand that is not very sensitive to a change in price. E<1, product is a need few to no substitutes, people will buy no matter the price
- Unitary Elastic- E=1
Examples of Inelastic: Insulin, salt, glass, milk, etc.
Price Elasticity of Demand
Step 1: Quantity: (New quantity - Old quantity)/Old quantity
Step 2: Price: (New price - Old price)/ Old price
Step 3: PED: (% of change in quantity demanded/% of change in price)
A good example for capital goods or another way to describe capital goods could be man-made, durable items used by businesses to produce goods. They are fixed assets in accounting. Consumer goods could be described as needs or wants and not as durable as capital goods.
ReplyDeleteYes examples of capital goods are like buildings, machines, furniture, etc.
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