ECO 1104 Chapter 4: Microeconomics

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ECO 1104 Full Course Notes
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ECO 1104 Full Course Notes
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Is the measure of how much customers and producers will respond to a change in market conditions. Can help anticipate how others will respond to changes in the market. Measures of elasticity: price elasticity of demand and price elasticity of supply. Cross-price elasticity of demand: describes what happens to the quantity demanded of one good when the price of another good changes. Income elasticity of demand: how much the quantity demanded reacts to changes in consumers" incomes. Describes the size of the change in the quantity demanded of a good or service when its price changes. The measure of consumers" sensitivity to price changes. When buying decisions are hugely influenced by price: the demand curve is more elastic (price causes a large change in qd) When customers are not very sensitive: the demand curve is less elastic. Price elasticity of demand = % change in q demanded.

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