ECO100Y1 Chapter Notes - Chapter 5: Demand Curve, Normal Good
Document Summary
Measure of responsiveness of quantity demanded or quantity supplied to one of its determinants. Measure of how much the qd of a good responds to a change in p. Total revenue: increase in p decrease in tr. If the qd responds substantially to changes in p. Total revenue: increase in p increase in tr. If qd responds slightly to change in p. Availability of close substitutes ---- more substitutes, more elastic. Definition of the market (food ice cream vanilla ice cream) % change in qd / % change in p (q1-q2) / [(q1+q2)/2] / (p1-p2)/ [(p1+p2)/2] % change in qd / % change in income. Positive --- normal goods: higher income raises qd. Negative --- inferior goods: higher income lower qd. Measure of how much qd responds to change in p in another good. % change in qd1 / % change in p2. Depends on the flexibility of seller to change the amount of good they.
