Summary of chapter 4 of the book Economics. Written by N. Gregory Mankiw and Mark P. Taylor, 3rd edition. Written for IBMS students of Avans or for the course Economics. ISBN 9781408093795.
Readings (Chapter 1-9, 14 of Mankiw and Taylor book) for Principles of Economics Midterm
Introduction to Microeconomics - Summary
Macroeconomic Revision Notes
All for this textbook (23)
Written for
Avans Hogeschool (Avans)
Bedrijfseconomie / Finance & control
Economics
All documents for this subject (16)
1
review
By: jerem22 • 5 year ago
Seller
Follow
kirstenderover
Reviews received
Content preview
Economics Chapter 4 Summary
‘Elasticity and its applications’.
Elasticity – a measure of the responsiveness of quantity demanded or quantity supplied to one of its
determinants.
The price elasticity of demand
Price elasticity of demand – a measure of how much the quantity demanded of a good responds to a
change in the price of that good. Computed as the percentage change in quantity divided by the
percentage change in price.
𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑
𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒
((In this boos we follow the common practise of dropping the minus sign and reporting all the price
elasticities as positive numbers!!))
Its determinants:
Availability of close substitutes
-> the closer the substitute, the more price elastic the good is (buyers can easily switch)
Necessities versus luxuries
-> necessities, inelastic demand / luxuries, elastic demand
Definition of the market
-> the narrowly defined the market, the more elastic the demand
Proportion of income devoted to the product
-> the higher the proportion of income devoted to the product,the greater the price elasticity
Time horizon
-> the longer the time horizon, the more elastic demand a good tend to have
o The midpoint method
If you try calculating the price elasticity of demand between two points on a demand curve
(Multiply both to get an percentage (No minus numbers!))
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller kirstenderover. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.25. You're not tied to anything after your purchase.
