LOS Chapter 5 - Chapter 5 A Elasticity is a measure of the...

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Chapter 5 A. Elasticity is a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. B. The price elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price. Goods with close substitutes tend to have more elastic demand because it is easier for consumers to switch from that good to others. Necessities tend to have inelastic demands, whereas luxuries have elastic demands. The elasticity of demand in any market depends on how we draw the boundaries of the market. Narrowly defined markets tend to have more elastic demand than broadly defined markets because it is easier to find close substitutes for narrowly defined goods. Goods tend to have more elastic demand over longer time horizons. C.
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LOS Chapter 5 - Chapter 5 A Elasticity is a measure of the...

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