ECO100 Sept 19.docx

# ECO100 Sept 19.docx - ECO100 Quantity demanded increases...

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ECO100 September 19, 2016 Quantity demanded increases along the same line Increase in demand would mean an actual shift in the demand curve to the right Practice Test c, b, d, b, d Qs(p)-Qd(p) = 20 3+6pA – [4-2pA+3] = 20 4+8pA =20 8pA = 24 PA = 24/8 PA = 3 Elasticity Suppose demand for some good shifts out If 1 Qs(p) is not responsive to p (think fixed) Must rise to a lot to clear market (quantity cannot adjust) and Q* remains unchanged 2 Qs(p) very responsive to p (supply any amount at p*) P* remains unchanged and Q* rises Demand is elastic when quantity demanded is uite responsive to changes in price When quantity demanded is relatively unresponsive to changes in price, demand is inelastic The more elastic is demand, the less the change in equilibrium price and the greater the change in equilibrium quantity The Measurement of Price Elasticity N = Percentage change in quantity demanded -------------------------------------------------------- Percentage change in price Where percentage in quantity and percentage in price are the average price and average

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