EC120 Lecture Notes - Lecture 5: Horse Length, Demand Curve, Midpoint Method
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Elasticity is a measure of how much buyer and sellers respond to changes in market conditions. When studing how some event or policy affects a market, we can discuss not only the direction of the effects but their magnitude as well. Elasticity is useful in many applications, as we see toward the end of the chapter. The price of elasticity of demand and its determinants. Price elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in the price of that good. Computed as the percentage change in quantity demanded divided by the percentage change in price. If you are given the percentage changes in price and quantity demand, usel. If you are given two points , use midpoint method. Price elasticity of demand = (q 2 q 1)/[ q2+q 1 (p 2 p 1)/[ p2+p 1. The price elasticity of demand and its determinants: availability of close substitutes.