ECON 1050 Chapter Notes - Chapter 4: Kraft Dinner, Inferior Good, Normal Good

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Depends on the responsiveness of the quantity demanded to a change in price. We can compare the slopes of the demand curves, but we can"t always make a comparison because the slope depends on the units of price and quantity, which are usually unrelated. Price elasticity of demand: units free measurement of the responsiveness of the quantity demanded of a good to the change in its price, when all other influences remain the same. When a price rises, the quantity demanded decreases because of a positive change in price brings a negative change in quantity demanded, so the ped is a negative number. The magnitude tells us how elastic the ped is so we ignore the sign. Quantity demanded is consistent, no matter the price. Example: insulin; doesn"t have a lot of substitutes; usually a necessity. The smallest increase in price causes an infinitely large decrease in demand. %change in quantity is large and the %change in price is small.

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