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Week 4: Elasticity (Computing the Price of the Elasticity of Demand…

- - - - Elasticity demand = -1
- - - - Determines the options consumers have when the price chances
      - More substitutes = elastic demand
      - Few substitutes = inelastic demand
    - - Determines how much of the prce change affects the consumer
      - Big ticket item = elastic demand
      - Inexpensive item = inelastic demand
    - - Necesities = inelastic demands
      - Luxuries = elastic demand
    - - Broadly defined = inelastic demand
        
        Refers to specific products and not their types
      - Narrowly defined =elastic demand
        
        Particular brand or type of product
      - This question sits in isolation to the others
    - - Affects ability of consumers to respond to changes in prices
      - Short time horizon = inelastic demand
      - Long term horizon = elastic demand
- - - - Elasticity decreases (gets more inelastic) as we move down and right along a linear demand curve