ECON 1000 Lecture Notes - Lecture 6: Demand Curve, And1, Normal Good
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Measures the responsiveness of quantity demanded for a product to a change in price: no unit of measurement is needed, only the magnitude matters. % in qd / % in p. Elastic: very responsive to a change in price. Inelastic: not very responsive to a change in price. Inelastic and elastic: demand can be inelastic, unitary elastic or elastic and can range from zero to infinity, elasticity changes along a linear demand curve. If elastic and the price decreases, total revenue will rise. If inelastic and the price decreases, total revenue will also decrease. If unitary, regardless of the price changing, total revenue will remain the same. Main factors that influence ped: availability of substitutes, nature of the product, proportion of income spent on the good. A measure of the responsiveness of quantity demanded for one product (x) to a change in the price of another product (y).