Summary Elasticity in Microeconomics101 – Book-Based Study Notes Organized in Notion
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Course
Microeconomics101
Institution
Université Hassan 2
Book
Microeconomics
These notes on Elasticity in Microeconomics offer an in-depth look at one of the most crucial concepts in economics, with material drawn from a respected economics textbook. The guide covers the elasticity of demand and supply, as well as cross-price elasticity and the differences between short-run...
Elasticity Summary - Microeconomics101 - Notion-Based Study Notes
Demand Summary - Microeconomics101 - Comprehensive Notes Made in Notion
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Microeconomics101
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{from reference book}
book title: Jeffrey Perloff - Microeconomics Theory and Applications with
calculus, fifth edition.
check pages 56,57,58,59,60
DEMAND:
Where the price is zero, a 1% increase in price does not raise the price, so
the quantity demanded does not change. At a point where the elasticity of
demand is zero, the demand curve is said to be perfectly inelastic.
For quantities between the midpoint of the linear demand curve and the
lower end,
where Q = a, the demand elasticity lies between 0 and -1: 0 7 ε 7 -1.
A point
along the demand curve where the elasticity is between 0 and -1 is inelastic
(but
not perfectly inelastic): A 1% increase in price leads to a fall in quantity of
less than
1%. For example, at p = $3 and Q = 9, ε = -1/3, so a one percent increase in
price
causes quantity to fall by one-third of a percent. A physical analogy is a
piece of rope that does not stretch much—is inelastic—when you pull on it:
Changing price has relatively little effect on quantity.
At the midpoint of any linear demand curve, p = a/(2b) and Q = a/2, so ε = -
bp/Q = -b[a/(2b)]/(a/2) = -1. Such an elasticity of demand is called a unitary
elasticity.
{from reference book} 1
, At prices higher than at the midpoint of the demand curve, the elasticity of
demand
is less than negative one,
ε < -1. In this range, the demand curve is called elastic. A 1% increase in
price causes more than a 1% fall in quantity.
As the price rises, the elasticity gets more and more negative, approaching
negative
infinity -∞
. Where the demand curve hits the price axis, it is perfectly elastic.
constant elasticity of demand:
The elasticity of demand varies along most demand curves, not just
downward-sloping linear ones. However, along a special type of demand
curve, called a constant-elasticity demand curve, the elasticity is the same
at every point along the curve.
{from reference book} 2
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