ECON 2 Lecture Notes - Lecture 16: Demand Curve, Normal Good, Economic Surplus
Document Summary
To find the percentage change in quantity, you divide the change in quantity by the average quantity. You can find the percentage change in price the same way. Elastic: the percentage change in quantity is more than the percentage change in price which means the elasticity is greater than one. Elasticity: a measure of the responsiveness of quantity demanded (or supplied) to a change in the price of a product. Income elasticity of demand: a measure of how the quantity demanded of a good responds to a change in income. Normal good: a good with a positive income elasticity of demand, that is, the quantity demanded increases as income increases. Inferior good: a good with a negative income elasticity of demand, that is, the quantity demanded decreases as income increases. Cross-price elasticity of demand: a measure of how the quantity demanded of one good responds to a change in the price of another.