ECON 1 Lecture Notes - Lecture 6: Price Elasticity Of Demand, Demand Curve, Carpool
Document Summary
Day 6: elasticity and its applications (continued from last class on day 5) Use the following information to calculate the price elasticity of demand for iphones: if p = , quantity demanded = 10,600 if p = , quantity demanded = 8,400. Use the midpoint method to calculate percentage changes. 100% = 23. 16% price elasticity of demand = Availability of close substitutes (when higher higher price elasticity) Narrowly defined goods (higher price elasticity than for broadly defined ones) Blue jeans (narrowly defined) have more substitutes, like black jeans. Clothing (broadly defined), however, does not luxuries (higher price elasticity than for necessities) insulin (necessary to diabetics) change in price would cause little to no decrease in demand. Price elasticity of demand > 1 demand is elastic. Price elasticity of demand < 1 demand is inelastic. Price elasticity of demand = 1 demand has unit elasticity. Price elasticity of demand = 0 demand is perfectly inelastic (demand curve is vertical)
