AGEC 105 Lecture Notes - Lecture 6: Ceteris Paribus, Demand Curve, Veal
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6 Feb 2017
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Topics of discussion: own price elasticity of demand, income elasticity of demand, cross price elasticity of demand, other general properties, applicability of demand elasticities. Responsiveness of the quantity demanded to price changes. To measure the responsiveness of the quantity demanded to change in price, we use a measure called price elasticity of demand. Own price elasticity of demand - point elasticity approach: own price elasticity of demand = % change in quantity / % change in price, point elasticity: Own price of elasticity of demand = [ q p] x [pa qa] _a is after & _b is before. Own price elasticity of demand arc elasticity approach (formula we are using: own price elasticity of demand = % change in quantity / % change in price, arc elasticity: Own price of demand = [ q p] x [average of p average of q] Average of p = (pa + pb) 2. Average of q = (qa + qb) 2.
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