ECON 201 Lecture Notes - Lecture 5: Demand Curve, Normal Good, Inferior Good
Document Summary
Elasticity is a measure of how much buyers and sellers respond to changes in market conditions. Measure of the sensitivity of demand and supply to changes in market conditions. Own price elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in the own price of that good (absolute value) Elasticity is exactly 1 = unit elastic. Elasticity & total revenue along a linear demand curve. Even though the slope of a linear demand curve is constant, the elasticity is not. the value of the price elasticity of demand does not equal to the slope of the demand curve. At points with a low price and high quantity, the demand curve is inelastic. At points with a high price and low quantity, the demand curve is elastic. Income elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in consumers" income.