ECON 1200 Chapter Notes - Chapter 5: Midpoint Method, Demand Curve, Drug Education
Document Summary
Chapter 5: elasticity: measure of how much buyers & sellers respond to changes in market conditions (measure of the responsiveness of quantity demanded/quantity supplied to change in one of its determinants) Demand is inelastic if quantity demanded responds only slightly to changes in price: influences on price elasticity of demand. Availability of close substitutes: goods w/ close substitutes tend to have more elastic demand b/c easier for consumers to switch from that good to others. Necessities vs. luxuries: necessities tend to have inelastic demands while luxuries have elastic demands (whether a good is a necessity/luxury depends on preferences of buyer) Definition of the market: narrowly defined markets tend to have more elastic demand than broadly defined markets b/c easier to find close substitutes for narrowly defined goods. Time horizon: goods tend to have more elastic demand over longer time horizons. Computing the price elasticity of demand o.