ECON101 Chapter Notes - Chapter 4: Demand Curve, Economic Equilibrium, Negative Number

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Corey Van De Waal

Document Summary

Elasticity in economics is the measurement of how changing one economic variable (such as: supply, demand, income) affects other. In my words, it is the responsiveness of a good or service to a change in price. We know that when supply increases the equilibrium price falls and the equilibrium quantity increases. The answer to this is: it depends on the responsiveness of the quantity demanded to a change in price. For example, if the quantity demanded is greatly affected by a small change in price, this means that the qd is elastic. In the textbook we get two different scenarios that give rise to 2 different outcomes. The different outcomes arise from the differing degrees of responsiveness of. Qd to a change in price, otherwise known as the price elasticity of demand. In this case, only because we are using the same units we can compare the responsiveness of the qd to a change in price of both scenarios.