I.FI
Tasticity
ityofDemand how sensitive consumers
are to Δ in Price
Midpoint'ISummative
ES
Economists use elasticity over slope
because it is robust to scale changes
We want our measure of sensitivity to be robust
ig
In
iffenear
inelastic
Make measurement Robust by including D
instead of absolute change
Itchange Q
flatter demandcurves MoreELASTIC
Cost
WMMWi
Price
LE LE Elasticity
AP of good A relates to consumption
of good B
Total Revenue Elasticity
Nelastic try eat Efam EE p Etat
ELASTIC PUTTRTY led 1 Income Elasticity
Δ in Income relates to 1 in consumptio
infected
E pentor
Determinants DEMAND E 0 no effect
Availability of Substitutes
EYE 55 me Gsfc 4 Necessity of Product
2 Passage of Time
gᵗ In m e 9a fc 5 share of Budget
smallershare less
3 Def of Market Larger share more
m c
Determinants SUPPLY
1 Cost to scale up production 3 scope of supply
Difficult to increase production less elasi Glb 1 5 31 7 1
, DfE India is c Eai'sp EreElastic
2 Market for inputs 4 Passage of Time
in niim e in cE st iin i c
Price Controls
rice control government mandated price that imposes a legal
maximum or minimum price in the market
Ean SEE.fi umpricesellerI.f 9e
Shortage QD Qs
nice Floor Ecm price sellers 819
causes SURPLUS 5
surplus QS QD
Welfare of Binding Reor welfare of Binding Elle
CS decreases PF.ES Cs increases
L
as increases p P px.ES ppl
SWL cost to
efficiency
pg
i EEi n is
i
economicinefficiency
QD as
surpluses Shortages
is is s sina.EE scimenersd
Miss Allocation of Resources
Rent control Minimum Wage
EXAMPLES of Price controls
es is i ii l
Tasticity
ityofDemand how sensitive consumers
are to Δ in Price
Midpoint'ISummative
ES
Economists use elasticity over slope
because it is robust to scale changes
We want our measure of sensitivity to be robust
ig
In
iffenear
inelastic
Make measurement Robust by including D
instead of absolute change
Itchange Q
flatter demandcurves MoreELASTIC
Cost
WMMWi
Price
LE LE Elasticity
AP of good A relates to consumption
of good B
Total Revenue Elasticity
Nelastic try eat Efam EE p Etat
ELASTIC PUTTRTY led 1 Income Elasticity
Δ in Income relates to 1 in consumptio
infected
E pentor
Determinants DEMAND E 0 no effect
Availability of Substitutes
EYE 55 me Gsfc 4 Necessity of Product
2 Passage of Time
gᵗ In m e 9a fc 5 share of Budget
smallershare less
3 Def of Market Larger share more
m c
Determinants SUPPLY
1 Cost to scale up production 3 scope of supply
Difficult to increase production less elasi Glb 1 5 31 7 1
, DfE India is c Eai'sp EreElastic
2 Market for inputs 4 Passage of Time
in niim e in cE st iin i c
Price Controls
rice control government mandated price that imposes a legal
maximum or minimum price in the market
Ean SEE.fi umpricesellerI.f 9e
Shortage QD Qs
nice Floor Ecm price sellers 819
causes SURPLUS 5
surplus QS QD
Welfare of Binding Reor welfare of Binding Elle
CS decreases PF.ES Cs increases
L
as increases p P px.ES ppl
SWL cost to
efficiency
pg
i EEi n is
i
economicinefficiency
QD as
surpluses Shortages
is is s sina.EE scimenersd
Miss Allocation of Resources
Rent control Minimum Wage
EXAMPLES of Price controls
es is i ii l
