CAS EC 101 Lecture Notes - Lecture 5: Midpoint Method, Demand Curve, Determinant
tealzebra3 and 39199 others unlocked
56
CAS EC 101 Full Course Notes
Verified Note
56 documents
Document Summary
Elasticity: measure of the responsiveness of quantity demanded or quantity supplied, to a change in one of its determinants. Price elasticity of demand: how much the quantity demanded of a good responds to a change in the price of that good, percentage change in quantity demanded divided by the percentage change in price. Elastic demand: quantity demanded responds substantially to changes in price. Inelastic demand: quantity demanded responds only slightly to changes in price. Determinants of price elasticity of demand: availability of close substitutes. Goods with close substitutes: more elastic demand: necessities vs. luxuries. Luxuries: elastic demand: definition of the market. Narrowly defined markets: more elastic demand: time horizon. Demand is more elastic over longer time horizons. Computing the price elasticity of demand: percentage change in quantity demanded divided by percentage change in price, use absolute value (drop the minus sign, midpoint method. Two points: (q1, p1) and (q2, p2) ( q2 q1)