ECON 102 Lecture Notes - Lecture 5: Demand Curve, Midpoint Method, Normal Good
Document Summary
Elasticity - measures how much one variable responds to changes in another variable. Numerical measure of the responsiveness of qd or qs to one of its determinants. Price elasticity of demand = percentage change in qd / percentage change in p. Measures how much qd responds to a change in p. Along a demand curve, price and quantity move in opposite directions which would make price elasticity negative. Percentage change = end value - start value / start value x 100% This is a problem, different answers on where you start. Midpoint method = end value - start value / midpoint x 100% Number halfway between the start and end values, average of those values. Price elasticity is higher when close substitutes are available. People can buy substitutes compared to the only thing. Price elasticity is higher for narrowly defined goods than broadly defined ones.
