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elasticity
a measure of responsiveness (measuring responsiveness of quantities
high elastic
highly responsive (very reactive to change of price)
highly inelastic
highly unresponsive
price elasticity of demand
the more responsive quantity demanded is to a change in price, the more elastic is the demand curve
price elasticity of demand (Ed)
% change in quantity demanded/% change in price
total revenue
price x quantity
higher p means more revenue on each unit you sell
but you sell fewer units (lover Q), due to Law of Demand
what determines the price elasticity of demand?
more competing products mean greater elasticity
specific brands tend to have more elastic demand than categories of goods
necessities have less elastic demand
necessities: not substitutes exist (going without isn’t a substitute)
consumer search makes demand more elastic
demand gets more elastic over time
more substitutes become available over time
there’s more time to adjust
more substitutes
demand is elastic
less substitutes
demand is inelastic
individual brand has ____ close substitutes
many
category of goods has ___ substitutes
few
necessitites
no good substitutes are available
luxuries
more sensitive to price change
consumers searching for low-cost alternatice
more elastic
when do consumers search a lot?
big-ticket items
items you need to buy in large quantities
items you buy often
length of time elapsed since the price
less time to adjust means lower elasticity
over time, consumers can adjust their behavior by finding substitutes, making demand more elastic
price elasticity of supply: more responsive
quantity supplied is to a change in price
price elasticity of supply: more elastics
supple curve
what determines the price elasticity of supply?
inventories make supply more elastic
easily available inputs make supply elastic
extra capacity makes supply elastic
easy entry & exit make supply more elastic
over time, supply becomes more elastic
short, long, & very long term
substitutes
coress-price of demand is positive
complements
cross-price elasticity of demand is negative
Note 
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