ECON 101 Lecture Notes - Lecture 4: Ceteris Paribus, Normal Good, Inferior Good
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Econ 101 lecture 4 elasticity: price elasticity of demand, measurement i. ii. iii. iv. v. Price elasticity of demand where e = location and inclination: p/c x 1/slope. Ped: the responsiveness of qd to a change in p = p(price) sensitivity (relative change in qd) / (relative change in p) Position (location) - maintains the same slope but farther or closer to the origin in a parallel manner (further from the origin means that p/q falls and thus e falls) Inclination- same point but the slope increases (decreases) and e falls (rises) so imagine a pivot around a point (rotation: determinants i. shape value. Factors affecting ped: availability of substitutes of outputs, the more or better the substitutes of a good/service, the higher the e. Ped < 1: availability of substitutes depends on, definition of the good i. ii. The smaller the set, the greater the e. E. g. apple vs. fruit: time period i. ii. iii. e increases over time.
