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Introduction to Microeconomics - ECO 1104 - Part 2

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University of Ottawa
Serge Nadeau

ECO1104 Introduction to MicroeconomicsThe Market for Hybrid CarsNote when P rises producers supply a large quantity of hybrids even though the S curve has not shiftedExample Suppose that in the year 2010 the number of births is temporarily high How does this baby boom affect the price of babysitting services in 2015 and 2025 Hint Fiveyearolds need babysitters whereas fteenyearolds can be babysitters ECO1104 Introduction to MicroeconomicsOctober 4 2011Lecture 8Chapter 5 Elasticity and its ApplicationsObjectives Learn the meaning of the elasticity of demand and the elasticity of supply Examine what determines the elasticity of demand and the elasticity of supply Learn how to apply the concept of elasticityElasticityDenitionThe price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that goodAbsolute ValuesComputing the Price Elasticity of DemandAn annoying problem with the preceding formula is that the elasticity varies depending on whether it is a price increase or a price decreaseExampleFrom A to BP25 Q33Elasticity3325133From B to A 20 Q50P Elasticity5020250
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