Elasticity of Demand
A measure of how consumers react to a change in price

Steps to find Elasticity of Demand

1. Quantity Demand (New Quantity - Old Quantity)/(Old Quantity)
2. (New Price - Old Price)/(Old Price) 
3. Ped: (% Δ in Q demand)/(% Δ in P)
4. Absolute Value
5. Elastic, Inelastic, or Unitary?

•  Elastic Demand

-Demand that is very sensitive to a Δ in price
-E>1
-Product is not a necessity and has many substitutes 
-Ex. Soda, candy, fur coat, steak

• Inelastic Demand

-Demand that is not very sensitive to a Δ in price
-E<1
-Product is a necessity and has few to no substitutes 
-Ex. Salt, milk, insulin, gas

• Unitary Elastic

-E=1