ECON 101 Lecture Notes - Lecture 4: Perfect Competition, Apple Pie, Time Horizon
Document Summary
Elasticity = measure of responsiveness of an economic actor to changes in market factors, including price and income. Price elasticity = responsiveness of economic actors to changes in market prices. Income elasticity = responsiveness of economic actors to changes in his/her income. Total pro t = total revenue - total cost. Price = with a quantity of 100. Price = with a quantity of 300. Elasticity allows us to analyze supply and demand with greater precision. Inelastic demand = consumer is not responsive to price - they"ll pay anything. Price elasticity of demand is less than 1. Elastic demand = consumer is very sensitive to price, will only pay the price they want. Price elasticity of demand is greater than 1. Elasticity and the slope of a demand curve. Instead of looking at unit change, we look at percentage change. Example: paul used to weigh 200 lbs, but now he only weighs 175 lbs.