Chapter 3 Notes - Econ 206 Notes Chapter Three 01.23.08 1...

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Unformatted text preview: Econ 206 Notes Chapter Three 01.23.08 1. Price Elasticity of Demand Demand is elastic when quantity demanded is relatively responsive to a change in the product’s own price. Demand is inelastic if quantity demanded is relatively unresponsive to changes in price. Elasticity is related to the slope of the demand curve, but is not the same. The Effects of a Supply Shift with Two Different Demand Curves See Figure 4.1 on Chapter 4 slides The Measurement of Price Elasticity Elasticity (Greek letter eta: η ) is defined as: (See slide 4) The price elasticity of demand is almost always negative , but we will focus on its absolute value. Elasticity measures the change in p and Q relative to some “base” values of p and Q. The Use of Average Price and Quantity Demand elasticity between point “0” and point “1” on some demand curve is: (See slide 5)...
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Chapter 3 Notes - Econ 206 Notes Chapter Three 01.23.08 1...

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