Economics - Elasticity & Market Structures

elasticity

degree to which a demand/supply curve reacts to a change in price

a good is vv elastic if a slight change in P leads to a:

sharp change in the QD or QS

an inelastic good is one where a change in price creates only modest changes in QS

(a product that is difficult to produce in mass numbers like an antique item)

greater than 1

curve is elastic

less than 1

curve is inelastic

elastic curve

flatter curve

inelastic

more vertical curve

factors affecting a demand’s price elasticity (3)

• availability of substitutes

• amount of income to spend on the good

• time

four factors affecting supply’s price elasticity

1. spare production capacity (more means elastic)

2. stocks of finished products and components (more means elastic)

3. ease and cost of factor substitution (if more mobile, then elastic supply)

4. time period involved in production process (more elastic the longer a firm is allowed to adjust its production levels)

elasticity formula

percent change in quantity over percent change in price

equal to 1

unit elastic

a curve with a constant slope woul dhave

several elasticities

at a higher pirce you are in an __________

elastic portion of the D curve

at a lower price, thec D cruve is

less elastic

elasticities are

absolute numbers bc they suually come out as neg

percent change in quantity/price

change in price/quantity DIVIDED by average price/quantity

slope of elasticity:

change in price over change in Q

types of market structures (4)

1. monopolies

2. perfect competition

3. oligopolies

4. monopolistic competition

oligopoly has both

homogeneous products and differentiated

perfect competition has

homogeneous product

examples of perfect comp

none exist except for agriculture

mono comp exes

fast food, retail, stores, cosmetics

examples of oligopoly

cars, soft drinks, computers

examples of mono

small-town newspaper, rural gas station