ec-22 - i. Perfectly Elastic ii. Perfectly inelastic f....

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Chapter 5 I. Elasticity of Demand a. Price elasticity and its determinants i. Def 1. How much quantity demanded responds to ∆ in price ii. Availability of close substitutes 1. More available→ more elastic iii. Necessary V Luxury 1. Necessity → inelastic 2. Luxury → elastic iv. Definition of market 1. Narrowly defined market → less substitutes→ more elastic v. Time horizon 1. Longer amount of time → more elastic b. Computing the P elasticity of Demand i. Price elasticity formula ii. The midpoint formula c. The variety of D curves i. Ed > 1
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1. Elastic ii. Ed < 1 1. Inelastic iii. Ed = 1 1. Unit elastic d. Total revenue and price elasticity of Demand i. TR 1. The amount spent by buyers and received by sellers 2. P x Q ii. Relativity elasticity 1. Elastic 2. Inelastic a. P & TR move in same direction e. Special cases of Elasticity
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Unformatted text preview: i. Perfectly Elastic ii. Perfectly inelastic f. Other demand curves i. Income elasticity of Demand 1. Measures how the Qd ∆s as consumer income changes 2. Formula 3. What it says a. Large number → reflects normal goods b. Small number → reflects inferior goods ii. Cross-price elasticity of Demand 1. How the quantity demanded of one good changes as the Price of another good changes 2. Formula II. Elasticity of Supply a. The Price elasticity of supply and its determinants i. Definition 1. How much the Quanitity supplied responds to ∆s in Price ii. Elastic if Q changes substantially relative to changes in price b. Comparing p elasticity of Supply i. P Elasticity of Supply formula c. The Variety of supply curves i. Perfectly inelastic ii. Perfectly inelastic...
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This note was uploaded on 04/19/2011 for the course ECON 200 taught by Professor Staff during the Winter '09 term at Indiana.

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ec-22 - i. Perfectly Elastic ii. Perfectly inelastic f....

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