ECO 304K Lecture Notes - Lecture 12: Demand Curve
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ECO 304K Full Course Notes
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Document Summary
Elasticity (page 90): a general concept used to quantify the response in one variable when another variable changes. Elasticity of a with respect to b = % a / % b. Measures the responsiveness of demand to changes in price. Price elasticity of demand = % change in quantity demanded / % change in price. Can vary between 0 and negative infinity. The law of demand implies that price elasticity of demand is nearly always negative. Elasticity of 0 (perfectly inelastic) indicates that quantity demanded does not respond at all to a price change. Price elasticity of supply: how supply responds when prices change. Cross-price elasticity of demand: how the price of one good affects the demand for another good. Perfectly inelastic demand (page 91): demand in which quantity demanded does not respond at all to a change in price (vertical demand)