# Chapter_4 - Ch 3 Review Markets Demand&amp;amp Law of...

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Unformatted text preview: Ch. 3: Review Markets Demand &amp;amp; Law of Demand Movement along demand curve versus shift in demand Supply &amp;amp; Law of Supply Movement along supply versus shift in supply curve Market Equilibrium and Price Determination Ch. 4: Elasticity Demand Elasticities Price Elasticity of Demand Cross Elasticity of Demand Income Elasticity of Demand Supply Elasticities Elasticity of Y w.r.t X Elasticity stretch-ability Measures how much Y stretches in response to a stretch in X Percentage change in Y ------------------------------------ Percentage change in X Price Elasticity of Demand The price elasticity of demand is a unit-free measure of the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buyers plans remain the same Calculating Elasticity The price elasticity of demand is calculated by using the formula: Percentage change in quantity demanded ---------------------------------------------------------- Percentage change in price Price Elasticity of Demand To calculate the price elasticity of demand: We express the change in price as a percentage of the average price the average of the initial and new price We express the change in the quantity demanded as a percentage of the average quantity demanded the average of the initial and new quantity Inelastic Demand If the quantity demanded doesnt change when the price changes, the price elasticity of demand is zero and the good has a perfectly inelastic demand Unit Elastic Demand If the percentage change in the quantity demanded equals the percentage change in price, the price elasticity of demand equals 1 and the good has unit elastic demand...
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Chapter_4 - Ch 3 Review Markets Demand&amp;amp Law of...

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