ECON 1000 Lecture Notes - Lecture 6: Demand Curve, Former State Routes In Pennsylvania, Time Horizon
17 Oct 2016
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Chapter 5 - elasticity and its application (demand) - sept. Chapter 4 cont on sept 26 in week 3 tab. Chpt 4 argued that when price rises quantity demanded falls. Elasticity answers how demand and supply responds to shifts. Law of demand says fall in p means increase in qd. Elasticity says how much qd responds to price changes. Availability of close substitutes necessities versus luxuries i. ii. If food p went up, the demand would not go down (or very little), because it is needed. If car p went up, qd would go down. Definition of market - narrow or broad i. ii. If broad the elasticity will be fairly low (food) If defined narrowly the elasticity will be higher (rice) Initially small response, still needs to drive to work etc Short term: inelastic - limited ways to change behaviour. Long term: more elastic - more scope to how you can change in behaviour.
