ECON 1B03 Study Guide - Midterm Guide: Demand Curve
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ECON 1B03 Full Course Notes
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Elasticity- a measure of the responsiveness of quantity demanded or quantity supplied ton one of its determinants. Close substitutes- goods with close substitutes tend to have more elastic demand because it is easier for consumers to switch from that good to others. Necessities vs. luxuries- necessities tend to have inelastic demands whereas luxuries have elastic demands. Market- narrowly defined markets tend to have more elastic demand than broadly markets because it is easier to find substitutes for narrowly defined goods eg. ice-cream can be substituted with another desert, broad- food in general can"t. Time- goods tend to have more elastic demand over longer time, example gas, after a while they switch to better transportation and more fuel efficient cars. Price elasticity of demand- percentage change in quantity of demanded divided by percentage change in price { pc in qd/ pc in p } Absolute value: price elastics recorded as positives, drop minus sign.