MGEA01H3 Lecture Notes - Lecture 4: Nyquil, Price Elasticity Of Demand, Vending Machine

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA01H3
• Professor: Michael H O

Document Summary

Elasticity responsiveness to a given change. Demand elasticity want to measure the responsiveness of quantity demanded when price changes. A decrease in price: mercedes benz k. drop you"ve got to be kidding me: pop at the vending machine . Demand elasticity = % change in quantity demanded/ % change in quantity. Point elasticity using the starting point (old) as a reference point and measure price the change relative to starting point biased: reference point bias. When moving between the same two points, reference points change depending on which point you start from. So different elasticity is obtained don"t want this. So use the midpoint as a reference point in order to get rid of the bias. Elasticity is related to the slope (not equal to the slope of the demand curve)of the demand vurve: a straight line demand curve slope is constant constant elasticity vertical d (n = 0)