Micro 2-7 - • Why does the value of paintings rise after...

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Micro 2-7 Price Elasticity of SUPPLY Measures sensitivity of quantity supplied to price This elasticity is greater the more easily available inputs are Elastic supply curves are less steep (small increase in price elicits large increase in quantity) Perfectly inelastic supply curve is vertical. (same quantity no matter the price. ex. Parking spots in a garage are perfectly inelastic) When supply is inelastic, higher demand simply means higher price, not higher quantity
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Unformatted text preview: • Why does the value of paintings rise after an artist dies? Cause you can’t get any more. Fixed supply of paintings. Notion of Economic Rent • Payment in excess of amount necessary to bring forth a supply • Pure ‘windfall’ gain • Efficient to tax this gain Origin of ‘Rent’ • Land is fixed in inelastic supply • If more valuable use of land exists, landowners collect more rent Demand Perspective • Whose demand for coffee is inelastic? •...
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This note was uploaded on 04/30/2008 for the course ECON 200 taught by Professor Park during the Spring '08 term at American.

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