ECON 1201 Chapter Notes - Chapter 5: Minute Maid, Demand Curve, Root Beer
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ECON 1201 Full Course Notes
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Document Summary
Elasticity of demand - measures how responsive the quantity demanded is to a change in price. When the price of a good increase, individuals/business will buy less. The more responsive quantity demanded is to a change in price, the more elastic the demand curve. Elasticity is not slope, but related to slope. Elasticity rule - if two linear demand (or supply) curves run through a common point, then at any given quantity the curve that is flatter (larger slope) is more elastic. Fundamental determinant - how easy it is to substitute one good for another. Fewer substitutes for the good, the less elastic the demand. More substitutes for the, the more elastic the demand. As price of a good increase, it becomes more elastic over time because it gives more time for people to adjust to price change and possibly find a substitute.