ECON 101 Lecture Notes - Lecture 8: Demand Curve, Peanut Butter, Ceteris Paribus
Document Summary
The determinants of the price elasticity of demand: Price elasticities differ between products due to the alternative determinants of the price elasticity of demand. If a product has more substitutes available, it is likely to have more elastic demand. If a product has fewer substitutes available, it is likely to have less elastic demand. The most important determinant of price elasticity of demand. Length of time involved the time it takes for consumers to adjust their purchasing habits once prices change. In addition, it may take more time for available substitutes for a product to be developed. The more time that passes after a price change, the more elastic demand for a product becomes. % change in quantity demanded will be greater than the % change in price = elastic demand) The more narrowly we define a market, the more elastic demand will be.