COMM 295 Chapter Notes -Inverse Demand Function, Indifference Curve, Price Ceiling
Document Summary
= 40 derivative of demand with respect to price is negative. 2. 3 market equilibrium: market participants able to buy and sell as much as they want don"t want to change behaviour. 3. 1 elasticity: elasticity % change in a variable divided by the associated % change in another variable, price elasticity of demand - % change in quantity demanded (q), divided by % change in price (p) Q: arc price elasticity uses average price and average quantity as denominator. P / p: point elasticity elasticity at specific price-quantity combination. Income elasticity of demand - % change in quantity demanded to % change in income. Q: normal good good for which quantity demanded increase as income rises, positive income elasticity of demand, e. g. avocados, music downloads. E. g. price of cream increases, consume less coffee. Complements: positive as price rises of one good, buy more of substitute good. R2 = 0. 54, shows 46% of variation in demand is due to random errors.
