This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Now, D elasticities concerned with shifts to different D curve o 1. Income Elast. Of D E I = (%Q)/ (% income) E I > 0 : normal good E I < 0 : inferior good Dont use absolute value o 2. Cross-price Elast. Of D E xy =(%Q x )/ (%P y ) E xy >0 for substitutes coffee and tea E xy <0 for complements coffee and sugar (own-price) elast. of supply o E s = (%Q s )/(%P) o Irreproducible o E s =0 - perfectly inelastic supply o S is often perf. Inelastic in very short run If law of supply is followed then we have elast. of supply >0 Very long run, elast. of supply very large For D elast. + S elast. (own-price), elast. higher when more time to adjust o Extreme perfect elast. E s =...
View Full Document
- Fall '08