CAS EC 101 Chapter Notes - Chapter 5: Demand Curve, Midpoint Method, Margarine
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CAS EC 101 Full Course Notes
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Elasticity: measure of how much buyers and sellers respond to changes in market conditions. Price elasticity of demand: measures how much the quantity demanded responds to a change in price. Elastic: if quantity demanded responds substantially to changes in the price. Inelastic: if quantity demanded responds only slightly to changes in the price. Price elasticity of demand for any good measures how willing consumers are to buy less of the good as its prices rise. Goods with close substitutes have more elastic demand- it"s easier for consumers to switch from that good to others. Whether good is necessity of luxury depends on preferences of buyer. Narrowly defined markets tend to have more elastic demand than broadly defined markets. Easier to find close substitutes for narrowly defined goods. Goods tend to have more elastic demand over longer time horizons. Price elasticity of demand= percentage change in quantity demanded.