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Understanding Elasticity: Examples and Case Notes

Explore own price elasticity, income elasticity, and cross price elasticity of demand with detailed examples and notes. Learn about slope, substitutes, complements, and types of goods.

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Understanding Elasticity: Examples and Case Notes

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  1. Elasticity

  2. ELASTICITY General Case Note: Unit Free (Unlike Slope = dZ/dW)

  3. ELASTICITY • Examples: Own Price Elasticity of Demand Income Elasticity of Demand Cross Price Elasticity of Demand

  4. OWN PRICE ELASTICITY where is the slope of the demand curve

  5. OWN PRICE ELASTICITY eii=f(substitutability, time, proportion on income spent on the good,…) Cobb – Douglas e = -1 (Show) Perfect Substitutes e = ? Perfect Complements e = ?

  6. INCOME ELASTICITY OF DEMAND Income Elasticity of demand i> 0 Normal good i< 0 Inferior good

  7. CROSS PRICE ELASTICITY OF DEMAND Cross Price Elasticity of demand eij > 0 Substitutes eij < 0 Complements

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