ECON 201 Lecture Notes - Lecture 5: Demand Curve, Hyperbola, Midpoint Method

• School: University of Calgary
• Department: Economics
• Course: ECON 201
• Professor: A L L

Document Summary

Elasticity of demand below midpoint (inelastic), te up as p up or te down as p down. If the demand for wheat is inelastic, farmers are better off when p goes up. Nd > 1 for mars bars, (cet par) The following is after the 5,5 mark when te < 1. Income elasticity < 0, then good is inferior (buy more when income goes down) Income elasticity > 0, then good is normal (buy. If the cross elasticity of demand is > 0 then the goods are substitutes. If less than zero, they"re complements: = to zero, unrelated goods. Infinitely elastic in second one: know these. Use midpoint method to calculate elasticity. Find a gap in between the two curves. With tax equilibrium quantity is q1, ps read off supply curve at q1 (ps. = price seller keeps), pb (price buyer pays) read off the demand curve at.