ECON 160 Chapter Notes - Chapter 5: Demand Curve, Normal Good
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To measure how much consumers respond to changes in these variables economists use the concept of elasticity. Elasticity = measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants. Elasticity is a measure of how much buyers and sellers respond to changes in market conditions: the elasticity of demand. The price elasticity of demand and its determinants. The price elasticity of demand for any good measures how willing consumers are to buy less of the good as its price rises. Price elasticity of demand measures how much the quantity demanded responds to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price. Rules of thumb about what influences the price elasticity of demand.