ECON 208 Chapter Notes - Chapter 4: Eta, Demand Curve, T-Shirt
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ECON 208 Full Course Notes
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Excise tax is the tax on top of the producer"s price. Demand is said to be elastic when quantity demanded is very responsive to a change in the product"s own price. Demand is inelastic when quantity demanded is very unresponsive to changes in its price (ex. Insulin, gasoline in the short run, cigarettes in the short run) If the percentage change in quantity demanded is less than the percentage change in price, it is inelastic. Elasticity is related to the slope of the demand curve (but is not the same) Elasticity can be calculated at each point along the demand curve. The slope will be the same at every point but the elasticity will not be the same at every point. If the price increases by a small amount, the quantity demanded decreased by a fairly large amount. Steeper demand curve is less elastic (because there is less of a change in quantity demanded when the price changes)