This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Perfectly inelastic- vertical line Perfectly elastic- horizontal line Why are some goods inelastic and other elastic in demand? Inelastic = viewd by consumers as necessity Inelastic = amount of budget Why is Elasticity of Demand Important? Goods with an elastic demand, if price is lowered, total revenue and demand go up Elasticity of demand changes along the curve EI= Income Elasticity EI = % change in Q / % Change in I EI > 0 = normal good o EI< 1 = income inelastic o EI> 1 = income-elastic EI<0 = inferior good Cross Price Elasticity Exy > 0 = substitutes Exy < 0 = complements What about Supply? Elasticity of Supply- describes how responsive producers (sellers) are to a change in pirce Es = % change in q / % change in p Read 352 357...
View Full Document
- Spring '07