ECO 105 Goel Week 5 Notes: 9/14-9/18
ECO 105 Goel Week 5 Notes: 9/14-9/18 ECO 105
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This 2 page Class Notes was uploaded by Daniel Hemenway on Monday September 14, 2015. The Class Notes belongs to ECO 105 at Illinois State University taught by Rajeev Goel in Fall 2015. Since its upload, it has received 67 views. For similar materials see Principles Economics in Economcs at Illinois State University.
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Date Created: 09/14/15
ECO 105 Goel 914918 Slight Importance Moderate Importance High Importance Income Elasticity of Demand E1 Responsiveness of Quantity Demanded of a good to changes in income E1 AQD AI No absolute value Example E1 08 Normal and Necessity Example E1 13 Normal and Luxury E1 gt O Normal Good Positive E1 lt O Inferior Good Negative E1 lt 1 Necessity E1 lt O Luxury CrossPrice Elasticity of Demand Exv Responsiveness of Quantity Demanded of a good to changes in price of another good EXY AQD of X A Pof Y No absolute value EXY gt O X and Y are substitutes EXY lt O X and Y are complements EXY O X and Y are unrelated Example X Y and Z are all goods EYz 08 EYx 05 EYZ and EYX are both substitutes Exz 11 0 Exz are complements Price Elasticity of Supply Es Responsiveness of Quantity Supplied of a good to changes in its price Es AQs A P No absolute value Es Depends on i time the seller has time to respond and ii availability of inputs Es O inelastic immediate run no time to alter inputs 0 Es gt O somewhat elastic Short Run time to alter some but not all inputs 0 Es gtgt 0 most elastic Long Run time to alter all inputs ECO 105 Goel 914918 Applications of Elasticity Price Changes With inelastic Demands firms can afford to raise prices without worrying about revenue losses Tax Burden The party buyer or seller with greater unresponsiveness bears greater tax burden
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