Econ101September17 - Ex.) When price of sports cars...

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Econ 101 September 17, 2007 Elasticity : Responsiveness measures; Measurement of the percentage of change in one variable that results from a 1% change of another variable -Can compare across markets because it is unit-less -Inter (across) markets and Intra (within) market Two important elasticities: Price elasticity of demand, Price elasticity of supply: often referred to as “own” price elasticities Ex.) When price of toothpaste increases by 1%, quantity demanded falls by 0.3% so toothpaste demand is not very price sensitive, elasticity = -.03
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Unformatted text preview: Ex.) When price of sports cars increases by 1%, demand goes down by 2%, demand is very price sensitive, elasticity = -2 Ex.) When price of undeveloped metropolitan land increases by 1%, the quantity supplied doesnt change, its totally insensitive to the price Ex.) When price of poultry increases by 1%, the quantity supplied increases by 4, very sensitive, elasticity = 4 Inelastic = Elasticity between 0-1 Elastic = elasticity greater than 1 Unit elastic = elasticity = 1 FORMULA: P...
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