ECON-101 Lecture 5: Econ chapter 5
Document Summary
Chapter 5 elasicity and its applicaion elasticity- can live without. Goods with many substitutes tend to be demand elastic (horizontal line) ---- perfectly elastic demand (a competitive firm faces this type of demand curve because it is a price taker. ) Goods with few substitutes tend to be demand inelastic (vertical line) ----- goods like medicine tend to be perfect inelastic. Learn the meaning of elasicity of demand. Examine what determines the elasicity of demand. Learn the meaning of the elasicity of supply. Examine what determines the elasicity of supply. Apply the concept of elasicity in three very diferent markets (bb) An increase in the price of a product decreases the quanity demanded while the quanity supplied increases. The quesion is by how much they will change. Demand and supply elasiciies measure how responsive quanity demanded and quanity supplied are to a change in price.
