ECON 208 Chapter Notes - Chapter 4: Arc Elasticity, Demand Curve, Normal Good
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ECON 208 Full Course Notes
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Document Summary
The absolute price of a product is the amount of money that must be spent to acquire one unit if that product. A relative price is the price of one good in terms of another. Demand is said to be elastic when quantity demanded is very responsible to be a change in the products own price. Demand is inelastic if quantity demanded is very unresponsive to changes in its price. Elasticity related to the slope of the demand curve, bit it is not exactly the same. Slope gives absolute changes, but elasticity need percentage changes. If 2 demand curves cross, flatter on is more elastic than steeper one. If they don"t cross this may not apply. Elasticity is defined as: : = (q1-q0)/q average / (p1-p0)/p average, (general, for both point and arc elasticity, = point elasticity at price p=pave. Perfectly or completely inelastic: quantity demanded/supplied does not change as price changes o, vertical.