ECO 304K Lecture Notes - Lecture 5: Convenience Store, Demand Curve, Opportunity Cost
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There are certain markets with more elastic demand and supply. Refers to the responsiveness of the quantity demanded of a good to change in: the price of that good (price elasticity) focus, the price of another good (cross elasticity) Ex: prices are so much higher at your local convenience store royal blue grocery as compared to trader joe"s because you pay a price for convenience (royal blue opens longer, some for. 2 determinants of price elasticity e is for escape . How readily can you escape a price hike: substitutes, necessities vs. luxuries, time horizon (can you wait, definition of the market (how broad?) Availability of close substitutes it"s easier to escape a price increase demand is more elastic. Luxury goods easier to escape from when their prices rise more elastic demand. Necessities more difficult to escape from when their prices rise more inelastic demand. Ex: a speedboat (luxury) to a car (necessity).