Lecture_notes_elasticity

Lecture_notes_elasticity - Elasticity and Market Demand....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Elasticity and Market Demand. Demand Elasticity. A demand elasticity is a (unit free) measure of the (proportional) responsive- ness of quantity demanded to a change in price or income. (Own) price elasticity of demand for commodity i : e ii ( P, I ) = D i ( P, I ) P i P i D i ( P, I ) = ln D i ( P, I ) ln P i . Discrete approximation: e ii ( P, I ) = X i P i P i X i = X i /X i P i /P i = percentage change in X i percentage change in P i , holding income and all other prices fixed. e ii ( P, I ) 0 unless i is a Giffen good. Demand for a (non-Giffen) commodity i is elastic if | e ii ( P, I ) | > 1 unit elastic if | e ii ( P, I ) | = 1 inelastic if | e ii ( P, I ) | < 1. If demand for commodity i is elastic , P i- P i X i P i- P i X i unit elastic , P i- P i X i constant P i- P i X i constant inelastic , P i- P i X i P i- P i X i ....
View Full Document

Page1 / 7

Lecture_notes_elasticity - Elasticity and Market Demand....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online