ECON 200 Chapter Notes - Chapter 5: Demand Curve

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Elasticity: a measure of the responsiveness of quantity demanded or supplied to a change in one of its determinants. Measures how willing consumers are to buy less of the good as the price rises. Price elasticity of demand: measures how much the quantity demanded of a good responds to a change in the price of that good. (% change in quantity demanded / % change in price) Elastic: quantity demanded responds substantially to changes in price. (<1 quantity moves proportionately more than the price) Inelastic: quantity demanded responds only slightly to change in price. (>1 quantity moves proportionately less than the price ) Quantity moves the same amount proportionately to the price. Availability of close substitutes: more elastic demand because it is easy to switch to another good like it. (butter/margarine) eggs don"t have a substitute so they are less elastic. Necessities vs. luxuries: necessities have inelastic demand, because you need it no matter what the price is (doctor).

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