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Unformatted text preview: Notes: Chapter 2 Skip Sections 2.6 and 2.7 Will get to section 2.7 later in the course Elasticity Measure of responsiveness of : Quantity demanded to price changes Quantity supplied to price changes Quantity demanded to income changes Want measure that is NOT sensitive to UNITS of measurement Price Elasticity of Demand Elastic demandquantity demanded is very responsive to changes in price Inelastic demandquantity demanded is NOT very responsive to changes in price Elastic Demand P Q D 1 Inelastic Demand P Q D 2 Elasticity Definition Price elasticity of demand = (Percentage change in quantity demanded)/(percentage change in price) Percentage change in quantity demanded from a 1 percent change in price Ex: Quantity of CDs demanded falls by 5% when price of CDs increases by 10% Elasticity =  0.5 Price elasticity of demand Q P P Q d P P Q Q d Q P s lope Q P dP dQ d 1 Elasticity is measured ALONG a demand curve Elasticity of demand will typically vary at different points on a single demand curve Steeper demand curve (greater slope (abs value) )is less elastic Constant slope DOES NOT mean constant elasticity Slope vs. Elasticity P Q A B Elasticity is 1/slope*(P/Q)...
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This note was uploaded on 02/27/2010 for the course ECN 40279 taught by Professor Annstevens during the Spring '10 term at UC Davis.
 Spring '10
 AnnStevens

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