ECO 1104 Lecture Notes - Lecture 1: Normal Good, Breakfast Cereal, Sunscreen
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ECO 1104 Full Course Notes
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It is a numerical measure of the responsiveness of qd or qs to one of its determinants: determinants include the price of the good, prices of other goods, and income. The price elasticity of demand measures how much qd responds to a change in p. For computing the percentage change: end value start value /start value x 100. Determinants of demand price elasticity the good for which qd falls the most in percent will have the highest price elasticity of demand. With 20% increase in price breakfast because we have many other substitutes while sunscreen is a necessity in daily usage. The price elasticity of demand with be higher (lower) if close substitutes are (not) available if the good is narrowly (broadly) defined if the good is luxury (necessity) Higher p means more revenue on each unit you sell. If you sell fewer units (lower q) due to law of demand = less revenue.