Class Notes (1,100,000)
CA (630,000)
McMaster (50,000)
ECON (2,000)
ECON 1B03 (700)
Lecture 5

ECON 1B03 Lecture Notes - Lecture 5: Economic Equilibrium, Demand Curve, Inferior GoodPremium


Department
Economics
Course Code
ECON 1B03
Professor
Hannah Holmes
Lecture
5

This preview shows page 1. to view the full 4 pages of the document.
ECON 1B03 Lecture 5 Elasticity
Updates
- Midterm is now posted
- Email the TA if you have any issues or questions about your mark
- Available on Avenue under ‘grades
Elasticity
- Dry, but something economists use all the time
- Summary of elasticity:
Less than -1
Between -1 and
0
Between 0 and 1
Greater than 1
Ep
Elastic
Drop the sign
Flatter curve
Inelastic
Drop the sign
Steeper curve
-
-
En
Elastic
Inferior good
Inelastic
Inferior good
Inelastic
Normal good
Elastic
Normal good
Ea,b
Elastic
Complements
Inelastic
Complements
Inelastic
Substitues
Elastic
Substitutes
Es
-
-
Inelastic
Steeper curve
Elastic
Flatter curve
- Measures how responsive quantity demanded or quantity supplied is when one of the
determinants of it changes
- Big ones:
o Price, supply: how these things variate
- Inelastic something doesnt move or change
- Elastic something that can have a big change to even a little stimulus
- What happens when the price of a related good changes, or the demand changes, or
income, etc.
- Coefficients between -1 and 1: inelastic
o Little changes in determinants wont have a big reaction
- Coefficients < -1 or > 1 are elastic
o Very responsive
- Unit elasticity where elasticity = 1
o Its possible that percentage change in quantity demanded exactly equals
change in price
Kinds of Elasticity
- Ep: price elasticity of demand
o Law of demand: always in the opposite direction, always a negative sign
§ Can drop the minus sign, just take the absolute value
- En: income elasticity of demand
You're Reading a Preview

Unlock to view full version

Subscribers Only