ECON 101 Chapter Notes - Chapter 5: Midpoint Method, Demand Curve, Normal Good
Document Summary
The price elasticity of demand and its determinants. Elasticity - measure of how much buyers and sellers respond to changes in market conditions. Measure how much consumers respond to changes in variables. 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. Tend to have more elastic demand because it is easier for consumers to switch from that good to others. Necessities tend to have inelastic demands and luxuries have elastic demands. Narrowly defined markets tend to have more elastic demand than broadly defined markets because it is easier to find close substitutes for narrowly defined goods.