ECON 101 Chapter Notes - Chapter 5: Drug Education
Document Summary
The price elasticity of demand and its determinents: price elasticity a. i. Measure of how much the quantity demanded of a good responds to a change in the price of that good a. ii. Measures how willing customers are to buy less of the good as its price rises: what influences price elasticity of demand b. i. Time horizon: availability of close substitutes c. i. Close substitute = more elastic demand: necessities versus luxuries d. i. Luxuries elastic demand: definition of the market e. i. Easier to find close substitutes: time horizon f. i. Computing price elasticity of demand: price elasticity of demand = % change in quantity dem. Midpoint method: use midpoint of the price a. i. Use when calculating price elasticity of demand between two points: midpoint formula b. i. Variety of demand curves: demand considered elastic when elasticity >1, elasticity = 1; unit elasticity, steeper slope = smaller elasticity. Total revenue and the price elasticity of demand: total revenue a. i.