Econ 201, week 4+5
Econ 201, week 4+5 ECN 201 (Professor Colleen Scott)
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This 2 page Class Notes was uploaded by Thanh Notetaker on Thursday February 25, 2016. The Class Notes belongs to ECN 201 (Professor Colleen Scott) at La Salle University taught by Colleen Scott in Spring 2016. Since its upload, it has received 16 views. For similar materials see Introductory Microeconomics in Economcs at La Salle University.
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Date Created: 02/25/16
ECON 201. Week Four and Five (February 25 note) Elasticity of Supply %???? ???????? The Price Elasticity of Demand is calculated by the formulaε = %???? ???? With %Δ being the percentage change. ????1−????2 Step 1: Calculate %Δ Qd = * 100 (????1+????2)/2 ????1−????2 Step 2: Calculate %Δ P = * 100 (????1+????2 /2 %???? ???????? Step 3: Calculateε = %???? ???? 3 Cases of Elasticity of Supply: Supply is perfectly inelastic if the supply curve is vertical and the elasticity of supply is 0. Supply is unit elastic if the supply curve is linear and passes through the origin. (Note that slope is irrelevant.) Supply is perfectly elastic if the supply curve is horizontal and the elasticity of supply is infinite. Characteristics: 1) Elasticity of supply is Unit-free 2) Elasticity of supply has absolute value (get rid of all the negative when doing the math) Factors that influence the elasticity of demand: The elasticity of supply depends on Resource substitution possibilities Time frame for supply decision Resource Substitution Possibilities The easier it is to substitute among the resources used to produce a good or service, the greater is its elasticity of supply. Time Frame for Supply Decision The more time that passes after a price change, the greater is the elasticity of supply. Momentary supply is perfectly inelastic. The quantity supplied immediately following a price change is constant. Short-run supply is somewhat elastic. Long-run supply is the most elastic. Elasticity of Income: %???? ???????? Calculated by formula: εI= %???? ???? If Elasticity of income is < 0 : The good is an inferior good If Elasticity of income is > 0 : The good is a normal good, in which there are 2 cases: If Elasticity of income is 0 < x < 1: The good is a necessity If Elasticity of income is > 1: The good is a luxury
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