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LU 5 : ELASTICITY (Elasticity of Demand. ((Inelastic PE < 1, Elastic PE…
LU 5 : ELASTICITY
Elasticity of Demand
.
Availability of Close Substitude
Time Horizon
Necessities Vs Luxuries
Definition of Market
Inelastic PE < 1
Elastic PE > 1
Perfectly Inelastic PE=0
Perfectly Elastic PE= Infinity
Unit Elastic PE = 1
Income Elasticity of Demand
Normal goods
Inferior goods
Elasticity of Suppl
y
Determinants
Ability of sellers to change the amount of the good they produce.
Beach-front land (Inelastic)
Manufactured goods(Elastic)
Time period
Responsiveness in between price & quantity.