Econ 1 CLAS Notes - 1 Substitutes Demand for salt is very...

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Econ 1 CLAS Notes Elasticity is always negative A lot of change very elastic A lot of substitutes demand is very elastic o Easy to replace by something else. o Ex: certain kinds of cars Few substitutes inelastic Elastic o Lose more customers Inelastic o Don’t lose as many customers o Can raise prices o Ex: Ed’s tutoring services Unit elastic o Always 1:1 ration o TE = P x Q o 10,000 = (100) (100) Up 1%, down 1% 9999 = (101) (99) o Abstract construct Rent control excess demand Inelastic up & down with price Elastic up & down with quantity Things that Affect Elasticity
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Unformatted text preview: 1. Substitutes Demand for salt is very inelastic i. Not many substitutes ii. Low part of income 2. % income Large % of income more elastic i. Ex: Apartments Smaller % of income more inelastic i. Raising the price of gum a couple cents 3. Luxury vs. Necessity Necessities (things you must have) more inelastic Luxuries (things you don’t need) more elastic i. Prices go up on jewelry…. people stop buying jewelry because you do not have to have jewelry 4. Time...
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