ECO 101 Chapter Notes - Chapter 5: Midpoint Method, Demand Curve, Margarine
Document Summary
Elasticity-a measure of how much buyers and sellers respond to changes in market conditions. One type of elasticity measures how much demand for your products will fall if you raise your price. Another def- a numerical measure of responsiveness of qd or qs to one of its determinants. Law of demand--> the fall in the price of a good raises the quantity demanded. The price elasticity of demand and its determinants. Price elasticity of demand- measures how much the quantity demanded responds to a change in price. Computed as the percentage change in quantity demanded divided by the percentage change in price. Demand for good is said to be elastic if the quantity demanded responds substantially to changes in price. Demand is inelastic if the quantity responds only slightly. Goods with close substitutes tend to have more elastic demand because it"s easier for consumers to switch from that good to others.