Textbook Guide Economics: Demand Curve, Midpoint Method
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ECO101H1 Full Course Notes
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Document Summary
When quantity demanded responds substantially to a change in price, the demand is said to be elastic. When quantity demanded responds slightly to a change in price, the demand is said to be inelastic: the determinants of price elasticity of demand are: The availability of close substitutes tend to make demand more elastic. The dynamic between necessities and luxuries drastically change the demand"s elasticity; necessities tend to be more inelastic while luxuries are a lot more elastic. The definition of a market, meaning whether it"s broadly or narrowly defined, can change demand"s elasticity; narrow markets are typically more elastic while broad markets are inelastic. The increase in time horizon typically increase the elasticity of demand: the price elasticity of demand is expressed as the ratio between the percentage change in quantity demanded to the percentage change in price written as: The calculated value must always be presented as a positive number or an absolute value" regardless of the negative result.