ECN 104 Lecture Notes - Lecture 4: Midpoint Method, Demand Curve, Time Horizon
Document Summary
Elasticity 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. Elasticity is useful in many applications, as we see toward the end of the chapter. To measure how much consumers respond to changes in these variables, economists use the concept of elasticity. Elasticity: a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. The price elasticity of demand and its determinants. For example, suppose that a 10 percent increase in the price of an ice-cream cone causes the amount of ice cream you buy to fall by 20 percent. In this example, the elasticity is 2, reflecting that the change in the quantity demanded is proportionately twice as large as the change in the price.
