CAS EC 101 Lecture Notes - Lecture 7: Demand Curve
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Price of dvd players decreases by an average of per player. Quantity of dvd players sold increases by 1 million units. Price of gas decreases by average of 40 cents per gallon. Quantity of gas sold increase by 200,000 gallons. A measure of how sensitive quantity demanded is to changes in price. Price elastic of demand = percentage change in quantity demanded divided by the percentage change in price. The steeper the demand curve, the more inelastic. The flatter the demand curve, the more elastic. Along the flatter, more elastic demand curve, the more sensitive quantity demanded is to change in price. No difference in quantity demanded whether price goes up or down. Hint: graph is a vertical line that looks like the letter (cid:862)i(cid:863) No difference in price still causes lots of change in quantity demanded. Hint: graph is a horizontal line that looks like the letter (cid:862)e(cid:863) Calculating price elasticity of demand using midpoint formula.