PS261 Chapter Notes - Chapter 7: Hot Dog Bun, Demand Curve
Document Summary
Economists strive to understand changes in behaviour in terms of preexisting preferences and restrictions on fulfilling those preferences. Relation between the price of a commodity and how much of it is purchased. The degree to which price influences consuption is called elasticity of demand. The price of candy increases = purchase amount drops (highly elastic demand) Price of gas increases = people still buy it (less elastic demand) Four major factors influence how schedule constraints shape the reallocation of behaviour. Determine the degree of elasticity of demand/the extent to which increases in price cause a decrease in consuption: availability of substitutes. Availability of alternative reinforcers/substitutes increases the sensitivity of the original item to higher prices. There are lots of substitutes for news so newspaper value has decreased, but there aren"t many readily available substitutes for gasoline to fuel a car: price range.
