251Ch4lecture1 - P % Qd % Qd % P % P % Qd % Qd % P % P % Qd...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
9/5/2011 1 Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Elasticity Chapter 4: Elasticity Elasticity = “Responsiveness” P P Q Q D D Less response = less “elastic” More response = more“elastic” Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Price Elasticity of Demand Price Elasticity of Demand = Responsiveness of consumers to a change in price Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Price Elasticity of Demand • Slope = rise/run • Need a unit-free measure • Price Elasticity of Demand = ε d = % % d Q P Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Price Elasticity of Demand • 3 Ranges • ε d > 1 → > 1 → > → “elastic” demand • ε d < 1 → < 1 → < → “inelastic” demand • ε d = 1 → = 1 → = → “unit elastic” demand
Background image of page 1

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

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: P % Qd % Qd % P % P % Qd % Qd % P % P % Qd % Qd % P % Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants 9/5/2011 2 Determinants of d 1. Proportion of budget spend on the good Small proportion of budget Demand less elastic Large proportion of budget Demand more elastic Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Determinants of d 2. Availability of substitutes Lots of substitutes Demand more elastic Fewer substitutes Demand less elastic Definition of the market the more broadly the market is defined, the less elastic demand is Chapter 4: Elasticity Lecture 1: Price elasticity of demand definition and determinants Determinants of d 3. Time More time Demand more elastic Less time Demand less elastic...
View Full Document

This note was uploaded on 09/21/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

Page1 / 2

251Ch4lecture1 - P % Qd % Qd % P % P % Qd % Qd % P % P % Qd...

This preview shows document pages 1 - 2. Sign up to view the full document.

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