ECON 201 Lecture Notes - Lecture 30: Demand Curve, Caffeine
2 May 2019
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Elasticity powerpoint: elasticity, measures the responsiveness of demand or supply to one of its determinants, own price, price of related goods. Income: elastic demand, quantity demanded is responsive to price changes, demand is perfectly elastic when, a price increase will cause the quantity demanded to drop to zero, the graph is a horizontal line. If product is at a market price: raising price reduces revenue, lowering price raises revenue. A good or service is highly elastic if the slight change in price leads to a sharp change in the quantity demanded or supplied. These products are usually readily available in the market and a person may not necessarily need them in their daily lives (or, if there are good substitutes. ) Example: if the price of coke rises, people may switch to pepsi. If product is at a market price: raising price increases revenue, lowering price decreases revenue.
