GGR124H1 Chapter Notes - Chapter 5: Demand Curve
Document Summary
Elasticity measure of responsiveness of quantity demanded or quantity supplied to one of its determinants. Price elasticity of demand measures how much quantity demanded responds to change in price. Measures how willing customers are to buy less of good as price rises. Flatter demand curve, greater price elasticity of demand. Steeper demand curve, smaller price elasticity of demand. Total revenue amount paid by buyers and received by sellers. If demand is inelastic, increase in price = increase in tr. If demand is elastic, increase in price = decrease in tr. When demand is inelastic, price and total revenue move in same direction. When demand is elastic, price and total revenue move in opposite directions. When demand is unit elastic, total revenue remains constant when price changes. Even when slop of line is constant, elasticity is not. Income elasticity of demand measure of how much quantity demanded of a good respond to change in consumer"s income.
