CAS EC 101 Lecture Notes - Lecture 4: Demand Curve, Td Garden, Rela
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When building the supply-and-demand model, we drew lots and lots of curves and lines without saying anything about slope more than demand goes down and supply goes up . With the basics of supply-and-demand in our toolbox, we can now answer these questions. The slope of the demand curve, for example, tells us the change in price that cor- responds to a one-unit change in quantity demanded. The inverse of the slope slope = change in quantity demanded ( 1. For reasons to be ex- plained below, it is best to consider a slightly more nuanced concept than just the slope (or inverse of slope), which is what we will call elasticity: why slope is not enough. With elasticity, we want to capture the sensitivity of one variable to another. For example, the sensitivity of quantity demanded with respect to price. Example 1: when the price of a yacht is ,000,000, a rich consumer demands 2 yachts.