Textbook Notes (368,427)
Canada (161,877)
Economics (923)
ECN 104 (387)
Chapter 4

Chapter 4

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ECN 104
Halis Yildiz

Chapter 4: Elasticity, Consumer Surplus and Producer Surplus Elasticity allows analysis of supply and demand with greater precision Measure of how many buyers & sellers respond to change in market Elasticity: a measure of the responsiveness of QDQS to one of its determinants 4.1 Price Elasticity of Demand Price elasticity of demand: measure of the responsiveness of buyers to a change in the price of a productresource Relatively elastic: QD responds STRONGLY to a change in price Relatively inelastic: QD responds WEAKLY to a change in price ** take absolute value Midpoint formula: method for calculating price elasticity of demandsupply that averages the two prices & quantities a the reference points for competing % **take absolute value Interpretation of Price Elasticity of Demand Elastic demand: Quantity demanded responds strongly to changes in price Productresource demand with a price elasticity coefficient that is greater than one, Ed>1 Inelastic demand: www.notesolution.com
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