ECON 102 Lecture 12: Demand and Supply Elasticity
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Degree of responsiveness to a change in another variable (x and y) How does demand and supply change given one another thing changes (if price decreases what happens to quantity demanded looks into how much) Exy = (% change in y)/(% change in x) this does(cid:374)"t ha(cid:448)e a u(cid:374)it (cid:271)e(cid:272)ause you"(cid:396)e di(cid:448)iding percnetages not quantities/prices. Y changes from y1 to y2 [(y2 y1)/(y1)]x100 (the formula for % change) 0. 1 means that a 1% increase in price leads to a 0. 1% decrease in quantity demanded: when bank debit-card transaction fees increase by 10%, the number of debit card transactions that people wish to utilize declines by 67%. This number represents how much transactions will decline for every 1% increase in transaction fees. So o(cid:271)(cid:448)iously as the (cid:271)a(cid:374)k, you (cid:449)ould(cid:374)"t i(cid:374)(cid:272)(cid:396)ease the fees, instead decrease them to get more people to make the transactions that would make the bank money. It"s still %q/%p (cid:271)ut (cid:374)o(cid:449) it"s (q/avg. quantities x100)/(p/avg. prices x100)