EC120 Chapter Notes - Chapter 2: Margarine, Inferior Good, Normal Good
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EC120 Full Course Notes
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Determinants of elasticity: n depends on the ability and willingness of buyers to substitute between products and is higher in the longs run than the short run. Price goes up and willing to switch: gas n =. 09(short run), n=0. 31 (long run, if goods have closer substitutes, big categories low elasticity, small categories large elasticity, soft drinks. N=. 9 (industry), n=3. 8 (coca-cola) if goods price is a larger part of buyer"s income: cars. Xy: nxy> 0 if x and y are substitutes (positive elasticity, butter and margarine. Y = 0. 78 in india, y = 0. 15 in canada price elasticity of supply. Classification of s : same as (slide 2: s is higher, in the long-run than in the short-run (more time to adjust in the long run) o if inputs can be easily re-allocated. E. g. brain surgery (inelastic and cost a lot of money for training), farmland (elastic supply) o if costs per unit rise slowly with output.
