ECO100Y5 Chapter Notes - Chapter 4: Lead, Ceteris Paribus, Shampoo
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ECO100Y5 Full Course Notes
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Eco100 2013-2014 chapter 4 notes (all sections except 4. 3) Elasticity-measure of the responsiveness of one variable to a change in another variable. Price elasticity of demand ( )- how responsive quantity demanded is to a change in price, ceteris paribus. Calculating % change using average price and quantity (the midpoint method) Necessary so that the elasticity between two points is the same and not dependent on which point is designated first or second. Example: calculate the price elasticity of demand if price changes from 80 to 100 in the market for toy mice. Total expenditure = total revenue = price x quantity. |%changeinp| < |%changeinq| -> decrease in price, big decrease in q = total expenditure decreases. |%changeinp| > |%changeinq| -> big increase in price, decrease in q = increase in. |%changeinp| = |%changeinq| -> stays the same no change. ***always positive because law of supply (p increase, qs increase)