EC120 Lecture Notes - Lecture 6: Eurocopter Ec120 Colibri, Normal Good, Demand Curve
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Basic idea: elasticity measures how much one variable responds to changes in another variable. De nition: elasticity is a numerical measure of the responsiveness of qd or qs to one of its determinants. Ped = % change in qd/% change in p. Ped: measures how much qd responds to a change in p. Along a d curve, p and q move in opposite directions, which would make price elasticity negative. We will drop the minus sign and report all price elasticities as positive numbers. Midpoint method: (end value - start value/midpoint)*100. The midpoint is the number halfway between the start & end values, the average. The determinants of price elasticity: a summary. The price elasticity of demand depends on: The extent to which close substitutes are available. Whether the good is a necessity or a luxury. How broadly or narrowly the good is de ned. The time horizon - elasticity is higher in the long run than the short run.
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