ECON-101 Lecture Notes - Lecture 5: Margarine, Carpool
Document Summary
Elasticity: how sensitive buyers or sellers are when the price changes. Not very sensitive= inelastic demand (people buy a wee bit less) Availability of close substitutes: butter or margarine, goods that have lots of substitutes are generally price sensitive (elastic) goods that do not have any alternatives the demand is inelastic. Electronics, people usually shop around for the best price, when the price of luxuries goes up, we are price sensitive (elastic) o. With food people usually do not shop around for the best price, even if the price of salt quadrupled, id still buy it because it is a necessity. If you narrowly define the market people are price sensitive. If the market is large, people are not price sensitive. Amount of time people have to adjust their behavior, Buying gas, not much you can do over the term.