Elasticity - Elasticity: how one economic variable, such as...

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Elasticity: how one economic variable, such as quantity demanded, responds to changes in another economic variable, like price Price elasticity of demand is how much quantity demanded changes in response to price changes Price elasticity of supply measures how responsive supply is to change in price Price elasticity of demand: percent change in quantity demanded/percent change in price If the price elasticity of demand is greater than one, then price of good is elastic If the price elasticity of demand is less than one, the price of good is inelastic If demand curve is a vertical line, the price is perfectly inelastic, and quantity demanded is not responsive to price If the demand curve is perfectly elastic, it is horizontal and responds infinitely to price. If the price increases, demand falls to zero These things affect price elasticity: o Availability of close substitutes If a product has more substitutes available, it will have more elastic demand
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This note was uploaded on 02/27/2010 for the course ECON 101 taught by Professor Ganley during the Fall '06 term at SUNY Geneseo.

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Elasticity - Elasticity: how one economic variable, such as...

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