EC 201 Lecture Notes - Lecture 9: Midpoint Method
Document Summary
Price elasticity of demand: measures how much the quantity demanded responds to a change in price. Demand for a good is elastic if quantity demanded changes substantially to a change in price. Demand for a good is inelastic if quantity demanded changes only substantially. Doctor visits are necessity and sail boats are luxury. Price elasticity off demand = change in quantity demand / change in price. 10% increase in price of milk causes the amount of milk you but to ask by 20% Price elasticity of demand = 20%/10% = 2. Sail boats are elastic ( quantity 120 (q1) quantity 80 (q2) Elastic = 1 (unit elasticity) quantity moves some amount proportionally as price increase and quantity decrease. Elastic > 1 (elastic) quantity moves proportionally more than price. Elastic < 1 (inelastic) (between 0 and 1) quantity moves proportionally less than price. Price elasticity of supply: measures how much quantity supplied responds to a change in price.