ECON-2110 Lecture Notes - Lecture 23: Demand Curve
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The percent change in quantity is larger price rises by 1% than the percent change in price: consumers are price sensitive , demand is elastic is |(cid:2161)(cid:2160)|> 1, demand is inelastic is |(cid:2161)(cid:2160)|< 1. If demand is perfectly elastic, |(cid:2161)(cid:2160)|= demanded to zero demanded: there are no substitutes. Perfectly elastic demand doesn"t usually happen: the percent change in quantity is smaller the percent change in price, consumers aren"t price sensitive . Perfectly inelastic demand necessities never happens: this suggests that even a huge price change would not reduce quantity. Measuring elasticity: elasticity is the percent change in quantity if the, this suggest that even the smallest increase in price would reduce quantity, consumers are completely indifferent to two goods. Both of these are extremely uncommon: demand is always more elastic in the long run, with inelastic demand, substitutes can be other brands of one product.