ECON 1 Lecture Notes - Lecture 8: Midpoint Method, Demand Curve
Document Summary
A measure of the responsiveness or sensitivity to a change in a market condition. The concept applies to supply and demand. It measures the response to a change in: The price elasticity of demand measures the magnitude of change in the quantity demanded from a change in its price. E = % change of quantity /%change of price. The midpoint method calculates the elasticity at the midpoint of any 2 points. Price elasticity of demand is always negative (because the curve goes downward). Price elasticity of supply is always positive (because the curve goes upward). All goods and services can be broadly categorized based on elasticity. At the extremes, demand can be either perfectly elastic or perfectly inelastic. The relationship between p,q,tr, and ed is summarized as follows for a linear demand curve. Determinants of price elasticity of supply: availability of inputs, flexibility of the production process, adjustment time.
