ECON-203 Midterm 2 Notecards - Utility utility is a measure...

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Utility utility is a measure of the relative satisfaction or desiredness from consumption of goods Price Elasticity of Demand the responsiveness (or sensitivity) of consumers to a price change Price Elasticity formula Ed = (change in quantity)/ (sum of quantities/2) / (change in price)/(sum of prices/2) Elastic a specific percentage change in price results in a larger percentage change in quantity demanded, Ed greater than 1 Inelastic a specific percentage change in price produces a smaller percentage change in quantity demanded, Ed less than 1 Unit Elasticity percentage change in price and demand are the same, Ed = 1
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Substitutability generally, the larger the number of substitute goods that are available, the greater the price elasticity of demand. various brands of candy bars are generally substitutable for each other, say Snickers. On the other end, tooth repair: simply no substitutes Proportion of Income the higher the price of a good relative to consumers incomes the greater the price elasticity of demand
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