ECON 1 Lecture Notes - Lecture 7: Midpoint Method, Demand Curve
Document Summary
Own-price elasticity: responsiveness of demand to changes in the price. Sensitive to the starting point midpoint method - average starting and ending points. Changes in elasticity along a given demand curve. Average price / average quantity when converted to percentage changes. The factors that determine elasticity (not mutually exclusive) When quantity demanded does not respond at all to changes in the price. With medically necessary or addictive products, no matter what the price, the amount demanded will stay the same. When quantity demanded drops to 0 if the price increases. With identical products, like tennis balls or pink erasers. If |e| < 1, then () < () is inelastic. If |e| > 1, then () > () is elastic. If |e| = 1, then = is unit elastic. Midpoint method (percentage changes) = difference in p or q / average of p or q. After the price decline, revenue is p2 * q2.