COMMERCE 1AA3 Lecture Notes - Lecture 7: Broccoli, Inferior Good, Normal Good

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Published on 21 Mar 2016
School
McMaster University
Department
Commerce
Course
COMMERCE 1AA3
Professor

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Document Summary

Measure of how much buyers and sellers respond to changes in market. Measures how responsive qd or qs is to changes in price, income or prices of related goods. Price elasticity of demand, ep: measures how much the qd of a good responds to a change in the price of that good. Ep = percentage change in qd/percentage change in p. Coefficient of elasticity: the number we get from our calculation = ep. Size of coefficient will tell us how elastic the good is how responsive demand is to a change in price. Elastic: very responsive to changes: qd responds strongly to changes in price, the % change in qd > % change in p, ep>1, demand curve = fairly flat. Inelastic: not responsive to changes: qd does not respond strongly to price changes, the % change in qd < % change in p, ep<1, demand curve = fairly steep, e. g.

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