ECN 101 Study Guide - Midterm Guide: Ice Cream, Luxury Goods, Midpoint Method
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ECN 101 Full Course Notes
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Definition: how much the quantity demanded responds to a change in price. More elastic (easier for consumers to switch from one good to another) Butter and margarine: elastic (can be substituted) Goods tend to have more elastic demand over time. Gas grice increases but demand drops only slightly. Over time demand will decrease because people will move closer to work, use public transportation, etc. Demand curves and price elasticity of demand. Inelastic demand: increase in price = increase in total revenue. Elastic demand: increase in price = decrease in total revenue. Definition: measures how the quantity demanded of one good responds to a change in the price of another good. Sign and magnitude of cross-price elasticity of demand. Definition: measures how much the quantity supplied responds to change in price. It is easy to increase production if there is a shift in demand. If production of goods can be varied, supply is more elastic.