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price elasticity

change in quantity on change in price

\[\dfrac{\frac{\Delta Q}{Q}}{\frac{\Delta P}{P}} = \dfrac{\partial Q}{\partial P}\dfrac{P}{Q}\]

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  • < 1 → inelastic
  • > 1 → elastic

price-elasticity-1.png

the labor demand curve will be steep (i.e. more inelastic) if the marginal product of labor drops off quickly as more workers are added