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Lecture 12 - changes when incomes changes ceterus...

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February 9, 2009 If inputs are readily available, then that good has a high price elasticity of supply If inputs are not readily available, then that good has a low price elasticity of supply. As time passes after a price change, producers find it easier to change their production plans, so supply becomes more elastic Cross elasticity of demand – a measure of the extent to which the demand for a good changes when the price of a substitute or complement changes, other things remaining the same CEoD = %change in QD/ %change in price of one of its substitutes or complements this isn’t absolute value so signs are important!!! Income elasticity of demand – a measure of the extent to which the demand for a good
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Unformatted text preview: changes when incomes changes, ceterus paribus %change in QD/ % change income ALLOCATION METHODS AND EFFICIENCY What method is best? Is it efficient? Is it fair? Scarce resources might be allocated by: COMMAND, MARKET PRICE, majority rule, contest, first come first served, sharing equally, lottery, personal characteristics, force Command system – allocates resources by the order (command) of someone in authority ex.) if you have a job, most likely someone tells you what to do. Your labor time is allocated to specific tasks by command...
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