ECON101 Lecture Notes - Lecture 11: Hyperbola, Demand Curve
9 Oct 2016
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When there is a change in one variable, how will another variable change in relationship of it. If there is a change in x, how much does y change as a result of the change in x. Elasticity measures how responsive is variable y to a change in variable x. Important concepts: price elasticity of demand, definition and measurement, different types of elasticities, elasticity along a straight line demand curve, relationship between elasticity and total revenue, difference between slope and elasticity. Income elasticity of demand: cross elasticity of demand, elasticity of supply. Three important things to remember regarding elasticity of demand (ed) It is a unit free measure: take the absolute value and ignore the negative sign. The price elasticity of demand measures how strongly demanders respond to a change in the price of a good. The price elasticity of demand can be used to make quantitative predictions of how changes affect the price and quantity demanded of a good.
