ECON-E 201 Lecture Notes - Lecture 9: Ceteris Paribus, Demand Curve

• School: IU
• Department: Economics
• Course: ECON-E 201
• Professor: Graf Paul

Document Summary

Exam 1: 30 multiple choice questions similar to quizzes. Learning objectives: define, calculate, interpret elasticity of demand, distinguish between elastic, unit elastic, and inelastic demand. Different in how much quantity changes in response to price change. Calculating price elasticity: midpoint formula of good/service to changes in price. Small change in price = larger change in quantity = larger/more elasticity. Large change in price = smaller change in quantity = smaller/less elasticity: price elasticity of demand ()- measure (without units) of responsiveness/sensitivity of qd. Absolute value often used, since we want to know magnitude of number. Always true that (cid:882) because of law of demand- increase in price leads to decrease. = c(cid:2918)a(cid:2924)(cid:2917)e (cid:2919)(cid:2924) (cid:2901)d (cid:3177)(cid:3179)(cid:3171) (cid:3173)(cid:3164) (cid:3174)(cid:3176)ic(cid:3163) (cid:3177)(cid:3179)(cid:3171) (cid:3173)(cid:3164) (cid:3175)(cid:3179)a(cid:3172)(cid:3178)i(cid:3178)i(cid:3163)(cid:3177) = (cid:3018)(cid:3118) (cid:3018)(cid:3117) (cid:3117)(cid:3118)(cid:4666)(cid:3018)(cid:3117)+(cid:3018)(cid:3118)(cid:4667)/ (cid:3017)(cid:3118) (cid:3017)(cid:3117) (cid:3118) (cid:3118) (cid:3117)(cid:3118)(cid:4666)(cid:3017)(cid:3117)+(cid:3017)(cid:3118)(cid:4667) (cid:3018)(cid:3117)+(cid:3018)(cid:3118)/(cid:3017)(cid:3118) (cid:3017)(cid:3117) By using average price and average qd, we get same elasticity value regardless of in qd (ceteris paribus) whether price rises or falls.