## Calculating the Elasticity of Demand

Instructor: Alex Tabarrok, George Mason University

Elasticity of demand is equal to the percentage change of quantity demanded divided by percentage change in price. In this video, we go over specific terminology

Elasticity of demand is equal to the percentage change of quantity demanded divided by percentage change in price. In this video, we go over specific terminology and notation, including how to use the midpoint formula. We apply elasticity of demand to the war on drugs, and more broadly to the prohibition of a good when it has an elastic demand.

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Better. Better at responding means highly responsive. And worse at responding means highly unresponsive.
If France has the highest elasticity of oil demand, it means that France is the most highly responsive out of all countries to the same price change. France is better at responding, because it adapts better. It adapts better because it seems to have more options than other countries do. Perhaps France switches to natural gas or coal.

If you live in a college town and supply is about to increase, you want demand to be *inelastic*. If demand is elastic then all the units will fill even if prices stay high.

Then for the opposite, supply is about to decrease so you want demand to be elastic. That means renters will be able to find alternatives and the landlords will have to lower their prices to fill the housing that remains.