ECON 1000 Lecture Notes - Lecture 6: Normal Good, Demand Curve, Complementary Good
Document Summary
Basic idea: elasticity measures how much one variable responds to changes in another variable. It is a measure of how much buyers and sellers respond to changes in market conditions. When studying how some event or policy affects a market, we can discuss not only the direction of the effects but their magnitude as well. Definition: elasticity is a numerical measure of the responsiveness of qd or qs to one of it"s determinants. The price elasticity of demand and its determinants. How broad or narrow the good is defined (cars, japanese cars, honda) Price elasticity of demand = change quantity demanded change price. Price elasticity of demand measures how much qd responds to a change in p. Loosely speaking, it measures the price-sensitivity of buyers demand. The midpoint is the number halfway between the start and end values, the average of those values.