ECON 1B03 Lecture Notes - Lecture 5: Porsche 918 Spyder, Normal Good, Inferior Good
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ECON 1B03 Full Course Notes
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Elasticity measure of how much buyers and sellers respond to changes in market conditions. 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 quantity demanded of a good responds to a change in the price of that good. Coefficient of elasticity the number we got from our calculation. Size of coefficient will tell us how elastic the good is how responsive demand is to a change in price. Inelastic demand: quantity demanded does not respond strongly to price changes, the % change in qd < % change in p, ep < i, demand curve = fairly steep, examples include university textbooks, water, electricity. Elastic demand: quantity demanded responds strongly to changes in price, the % change in qd > % change in p, ep > 1, demand curve = fairly flat.